A revocable trust is usually set up by people to ensure proper management of their properties even after they die. A revocable trust is putting property into a trust and being able to remove the property and terminate the trust anytime in the future.
As opposed to a revocable trust, an irrevocable trust is putting property into a trust and not being able to retrieve the property ever again, even after you change your mind about your former decision. After all, once you create an irrevocable estate trust, the property no longer belongs to you, but to the trust.
Components of a Trust
To understand a trust better, one should be familiar with its four main components:
- Grantor – the person who created the trust
- Trustee – the individual or entity that is tasked to manage the trust property in accordance to the trust documents and to the conditions set by the grantor
- Trust assets – property of the grantor that has been transferred to the trust
- Beneficiaries – persons who are meant to receive the benefits of the trust
Benefits of a Revocable Estate Trust
There are various advantages to setting up a revocable estate trust. These advantages include but are not limited to the following:
- Probate can be avoided – Establishing a revocable living trust can help you avoid expensive multiple proceedings for probate, or the legal process for transferring your property when one passes away.
- A revocable trust can be changed or amended – This prevents a touch-move mechanism; you can change the trust while you are still alive.
- Preserving privacy over property affairs – Probate process can expose a person’s assets and properties to the public. Trusts allow preservation of privacy of the grantor, the assets and the beneficiaries.
- Prevent challenges to your estate – a grantor can disinherit anyone who poses a challenge over your estate conditions upon your death.
Deciding Whether a Revocable Estate Trust is for You
Though it has numerous advantages, revocable estate trusts may work for some but not for others. One of the disadvantages of having a revocable estate trust is assets placed under it is still considered part of the grantor’s properties.
This means that these properties are not protected if you get sued. These properties will also be subject to federal estate taxes and state estate taxes, as well as state inheritance taxes.