A revocable living trust could be a better option for you than a will or an irrevocable living trust. Each of these estate planning documents has advantages and disadvantages. If you are thinking about creating or updating your estate plan, a California wills and trusts attorney can help you evaluate the reasons why you might consider a revocable trust.
An Overview of Revocable Trusts
When you set up a revocable trust, you are the grantor. You sign a document, the trust agreement, that names someone to serve as the trustee. The trustee administers the trust, in other words, takes care of the business aspects.
The trustee can be an individual, like you or someone you nominate, or a corporation, like a bank. If you name yourself as the trustee, you should designate a second person or a corporation to serve as the successor trustee when you die or if you become incapacitated because of an illness, injury, or some other reason.
Advantages of a Revocable Trust
A revocable living trust allows you to do some things that you cannot do with a will or an irrevocable trust. For example:
- You get to change your mind. Once you create an irrevocable trust, you are stuck with the terms of the document. You no longer own the assets that you transferred to the irrevocable trust, so you lose the right to make new decisions about them. Let’s say that you left a fortune to your favorite nephew in your irrevocable trust, then became estranged from him a few years later. If you had made a revocable trust, you could change the terms of the trust, but not with an irrevocable trust.
- A revocable trust protects you while you are still alive. If you signed a will instead of a living trust, the will cannot help you if you become incapacitated. A revocable trust can allow the trustee to take care of your financial matters if you become unable to do so. For example, you contract an infectious disease that makes you severely ill for several months. If you had a living trust, your trustee could manage your income and pay your bills to prevent things like the repossession of your assets, evictions, and foreclosures.
- A revocable trust can respect your privacy. Wills have to go through probate, which includes filing the original will with the court. Court files can be public record. Trusts do not go through probate, so the administrator of your estate will not have to file your trust with the court unless someone contests the trust.
These are but a few examples of ways that a revocable trust could be a smart choice.
Things That a Revocable Trust Cannot Do
A revocable trust does not save you on income taxes or estate taxes because you still own the assets. Irrevocable trusts can save taxes, but that saving comes at the cost of never getting to make changes to the trust.
A revocable trust does not shield your assets from creditors. For example, if a creditor gets a judgment against you during your lifetime, the creditor can go after your assets to satisfy the judgment, even if you put your assets into a revocable trust.
Revocable trusts are not for everyone, but for many people, these documents are a wise decision. The right estate planning papers for you will depend on your unique situation and goals. Contact us today. Our California estate planning attorney can guide you through the process of evaluating your options and draft the documents for your estate plan.