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Estate planning can feel overwhelming. But a revocable trust might be the first advanced step in your overall plan. At Glassman Wealth Services, we frequently collaborate with our clients’ legal counsel and highly recommend that individuals and couples have a revocable trust in place. Here’s a fresh, straightforward look at why a revocable trust is worth considering.
What Is a Revocable Trust?
Imagine having a legal document that creates a trust that is flexible, private, and totally under your control. That’s a revocable trust: a legal tool you create during your lifetime, often referred to as a living (or inter vivos) trust. You’re the creator (the grantor), the manager (the trustee), and while you’re alive, the main beneficiary. And the best part? You can tweak or terminate it anytime you want.
What Does a Revocable Trust Do?
- Ensures privacy. Probate is public and messy; a revocable trust skips all that. Your assets and business stay private.
- Respects your wishes. Like a will, but better. A revocable trust outlines exactly how you want your assets distributed. And as your life changes, your trust can change. If you become unable to manage your finances, your successor trustee can quickly take over. And upon your passing, the acting trustee ensures that everything goes according to plan.
- Protects beneficiaries from creditors. Your assets in a revocable trust are often just as vulnerable to creditors as if they are in your personal name, but they’re likely shielded for your beneficiaries—as long as the assets stay in trust.
- May cut down on state estate taxes. In some states, estate taxes can take a big bite. A well-structured trust may help soften the blow.
What Doesn’t a Revocable Trust Do?
- Perform “tax magic.” Forget the myths. A revocable trust won’t save you on federal estate or income taxes while you’re alive. The IRS treats these assets as if they’re still in your name.
- Fund itself. Setting up the trust is just step one. You need to officially move your assets into it—change account registrations, re-title properties, and potentially change account beneficiaries.
- Impact federal exemptions. Moving assets into your trust generally isn’t a gift, so it doesn’t impact the federal lifetime gift or estate tax exemption, which is the amount you can pass without federal estate tax.
Should You Have a Revocable Trust?
That depends. You should think about it if:
- You want to avoid probate. If you hate the idea of your assets getting stuck in a public, lengthy probate process, a revocable trust is your ally.
- You own assets in multiple states. Without a trust, each state where you own assets could require its own probate process. A trust cuts through the red tape.
- Your investments are complicated. Real estate, art, stocks—if your asset mix is complex, a trust makes life easier for your heirs.
- You’re planning ahead for health issues. Should you face incapacity, a revocable trust allows a designated trustee to manage your assets without a court’s involvement.
Ready to Take Control?
Chat with your estate planning attorney to see if a revocable trust fits your needs. And remember, your Glassman Wealth advisor is here to work alongside your attorney to help craft, implement, and maintain a plan that works for you.