A trust, at its most basic, is a contract. Trusts are potentially useful tools for life planning and management of your assets during your life and disposition of assets after your passing.  A revocable trust is a trust that can be “revoked” or “amended” during your life, which means that it can be changed while you are alive.

Some sections of a trust read and act in a manner very similar to a Will. For example, a revocable lifetime trust will list beneficiaries of the trust assets, so you write out who “inherits” from you. Further, you can also choose who will manage the distribution of your assets after death. Finally, like a Will, you can change or amend a revocable lifetime trust during your life.

Unlike a Will, a revocable lifetime trust removes assets placed into the trust from probate, meaning it is possible to avoid an estate administration in the Surrogate’s Court in the County in which you reside.   The probate process is a process to “prove” or “verify” a Will and there are court fees and legal fees for probate of a Will.  You can avoid probate if all of your assets are either held in the trust, payable on your passing to the trust, or payable to other beneficiaries who are able to receive those funds.  You can also be the trustee of your own revocable lifetime trust, meaning you are still in charge of the trust assets, deal with the trust assets normally during your life, and can even take assets out of the trust and add assets into the trust.

While a Will can be thought of as “directions for the court, lawyer, and family,” a trust is closer to a “living container” where, during your life you can hold the living container as trustee, place your home, bank accounts, and other assets “into and out of the container,” and because you are in charge, retain all tax benefits and management rights during your life.  You can maintain control during your life.  You can also determine in writing who is in charge after you pass away by designating a successor Trustee (the person or people after you who will manage your trust).  There is a continual management of the trust and trust assets.  This means that your family or beneficiaries can avoid the administration of your estate through the court and smoothly transition from one trustee to the successor trustee when it is necessary.  It is important to get all assets in either in the trust, payable on death to the trust, or payable on death to beneficiaries who are able to receive the funds after death.

In addition to avoiding probate, a revocable lifetime trust also offers the potential for consistent management of your assets in the event you can no longer manage them yourself. If you were ever unable to manage the maintenance of your home, for example, due to an illness, or simply because the work of upkeep becomes “too much,” you can turn over control of your trust to the successor trustee in your revocable lifetime trust.   This allows the successor trustee to step in and manage trust assets. Basically, this means that, by creating a trust, you can allow the successor trustee to “step into your shoes” and help manage assets you have placed or deeded into your trust, such as your home.

There are minimal logistical changes if you place your assets in a revocable lifetime trust. You may receive bills and taxes as trustee of the trust; however, the amount and method of payment will not change. You may also have to determine, with your bank, how to handle your checking and savings accounts, with special attention to certain direct deposits, such as pensions or social security.        

A revocable lifetime trust should be part of a broader estate plan, typically in conjunction with a Will, a durable power of attorney, and consideration of beneficiaries and joint owners of certain assets.  It is also important to recognize that revocable lifetime trusts are one of a number of types of trusts, and determining which trust is right for you can vary greatly depending upon your lifestyle, future plans, and goals for the disposition of your assets after your death.  A revocable trust does not protect assets from long term care expenses.  Consultation with an attorney is essential to understand whether a revocable lifetime trust is the correct tool to achieve your estate planning and asset management goals.

By Bruce Beckman

With assistance and input from high school student Haley Smith