How do you determine whether you need a revocable trust? A revocable trust is distinguished by the fact that it can be changed or even cancelled by the trust-maker, at any time. A trust also offers flexibility because the trust-maker can choose to transfer assets to beneficiaries over time, rather than in a single lump-sum.
During the life of the trust-maker, income earned on trust assets goes to the person who made the trust. Property placed in the trust only transfers to the beneficiaries upon the death of the trust-maker.
A revocable trust is a legal entity created to hold ownership of a person’s assets. The trust-maker creates the trust, transfers assets to the name of the trust, and serves as the trustee, managing the assets placed in the revocable trust.
By using a revocable trust, the trust-maker reserves the right to make changes to the terms of the trust. That’s why it’s called a “revocable” trust – it can be changed, or even revoked.
A trust usually names a successor trustee. This person steps in to manage trust assets if the trust-maker becomes mentally incapacitated. Many times, trust assets are used to pay for on-going medical expenses.
Once the trust-maker dies, the assets held in trust are transferred according to the terms of the trust.
When it comes to a person's probate and estate planning needs, a Will and a Trust accomplish similar goals. At the time of the trust-maker’s death, assets in the trust are transferred to trust beneficiaries according to the terms of the trust.
One benefit of a revocable trust is its flexibility. The terms of the trust can be changed at any time. Also, the trust-maker can choose to transfer all of the trust assets at a single time, or can designate that assets be distributed over time. A trust-maker can set up provisions so that beneficiaries receive assets at certain points, like when they reach 18, 40, or whatever conditions the trust-maker wants to establish.
A revocable trust can also be used to keep property transfers private. Any assets that pass through the probate court are public record. Assets placed in a trust transfer automatically and are not subject to oversight by the probate court.
One downside of a trust is that it does not automatically adapt to changing circumstances. If a trust beneficiary gets divorced, or if there is the birth of a new child, the terms of the trust need to be changed.
A trust is also more expensive to create than a Will, and generally requires on-going management. A Will is less expensive and, once in place, does not need to be changed as often. However, a trust can be used to minimize probate expenses, and can also be used to reduce tax liability.
Some financial planners will tell you that everyone needs a trust. That may be the case for many people, but for some estates, a simple Will is sufficient.
A trust requires a larger up-front investment than a Will, and will require on-going maintenance. However, there could be some savings in probate costs and taxes when the trust-maker dies.
Speak with an experienced and knowledgeable Ohio probate and estate planning attorney to help you decide whether a revocable trust is right for you. Every situation is unique, and there is no one-size-fits-all legal advice.
If you are considering a revocable trust as part of your estate planning needs, contact an Ohio estate planning and probate lawyer at Wolfe Legal Services today. I work with people throughout greater Columbus, including Dublin, Bexley, Upper Arlington, New Albany, Marysville, Hilliard, Delaware, and Newark, and throughout Franklin County, Delaware County, Pickaway County, Fairfield County, Union County, and Licking County. Call (614) 263-5297 any time or complete our online form.