Estate plans are as variable and different as the individuals who create them. Each person will have his or her own goals in mind when crafting the estate plan, and this will mean that every estate plan must be individually crafted. Trusts are a common element in many different types of estate plans, and there are many various types of trusts to fit the varied needs of those estate plans. One popular type is a revocable will. A revocable will is one that is created during the life of the creator, who is called the “grantor.” The grantor will place certain assets into the trust, name a trustee, and a beneficiary. As the name suggests, the grantor can choose to change or even revoke a revocable trust at any time for any reason. Before deciding on a revocable trust for your estate plan, there are some pros and cons that you should consider.
First, as the name suggests, a revocable trust provides flexibility. With a revocable trust, you can always change your mind in the future as the contents of the trust, the trustee, the beneficiaries, or any of the other terms of your trust. This is important, especially as family dynamics can easily change. For example, you may not plan on having children and want to create a trust for your nieces and nephews. However, if then you unexpectedly do have children, you would want to add your own child to the trust, or even change the terms to name only your child as beneficiary. With a revocable trust, you are free to do so. Another pro is privacy. Unlike a will, trust documents are not typically filed with the court. Creating a revocable trust will mean that you can pass on assets to your chosen beneficiaries without the documents being part of a public record. Finally, depending on the terms of your revocable trust, you can arrange for your revocable trust to become irrevocable at the time of your death, and your assets will pass outside of probate. This can be very important for estate tax purposes, depending on the size of your estate.
There are, however, some drawbacks. First, unlike an irrevocable trust, there are no positive tax benefits to the grantor in creating a revocable trust. This is because with a revocable trust, you still have control over the assets, and therefore may still be taxed on those assets. The income earned by the assets within the trust are still attributable as assets and income of the grantor. Moreover, a revocable trust does not negate your need for a will. Even if you have a revocable trust, you will still need to give careful consideration to other estate planning documents that you may require.
We have helped many people with crafting a trust to fit their needs. Call us today at (651) 371-9117 to talk about your estate.