Revocable Trusts and Their Benefits
The Revocable Living Trust (RLT) (also referred to as Revocable Trusts) is perhaps one of the best single estate planning tools available to you in completing a viable, comprehensive and cost efficient family estate plan.
Unlike a Will, which is a creature of statute requiring statutory formalities, a trust is a contract between the Grantor (maker or donor, i.e., the person(s) setting up the trust), and the Trustee (i.e., the person(s) managing the trust). The contract will specify the duties and responsibilities of the Trustee (the manager) to properly manage assets titled in the name of the Trustee for the benefit of the Grantor, beneficiary, or for the benefit of other designated beneficiaries of the Trust.
Trusts are either revocable (changeable) or are irrevocable, and cannot be changed once they have been established. Trusts can be either living (or inter-vivos) trusts or testamentary trusts. Living Trusts are created during the lifetime of the Grantor to carry out some specific task or responsibility during the Grantor’s lifetime and thereafter. A Revocable Trust can be revoked, modified, or amended by the Grantor at anytime provided the Grantor is not incapacitated.
A revocable living trust is by far the most popular, as well as most flexible, of Trusts. Today you will find it used as the backbone of most comprehensive estate and wealth management plans. One of the primary reasons that individuals use a RLT is to provide for the lifetime management of assets for the benefit of the Grantor. In the case of a joint trust for the benefit of both husband and wife during their lifetime, the Grantor or Grantors’ double as both the maker and the manager (trustee) of the trust. After the Grantors have created the trust, they will re-title all of their assets, other than retirement plans and other annuities, to the name of the Trustee or Trustees. The Trustee(s) will manage the assets for the benefit of the Grantor(s). Each Grantor is a beneficiary of the Living Trust. Should a Grantor become disabled or incapacitated, their co-Trustee, (their spouse, an adult child, other individuals or entity) will take over as back-up Trustee and manage the assets for the Grantor as long as the Grantor lives.
In addition, once you have re-titled your assets (real estate, your investment accounts, your bank accounts, your business interest) in the name of the Trustee, the RLT becomes a very effective disability planning tool, eliminating, for all practical purposes, the need to have a court appointed conservator named to manage a disabled individuals assets during their incapacity. The backup Trustee does it for them.
An additional benefit associated with the RLT is its use as a substitute for a will. Assets held in your name as Trustee will be in your trust in the event of your death. Therefore, there will be no need to have the court appoint an “executor” or as we now call them, a “personal representative”, to handle the management and distributions of your assets after death. Your trustee will do this job. The Trust eliminates, for all practical purposes, the need to go through the court supervised management and distribution of your assets through probate. Accordingly, there will be no probate tax on your probate estate, since you will have no probate estate. Secondly, there will be no need to subject the distribution of your assets to supervision by the court appointed administrator of accounts or other officials. This effectively eliminates the need to pay court costs, administrator fees and recording costs associated with probate.
If you live on Long Island and have questions about revocable trusts, please contact us online or call (516) 280-7288. We will get back to you promptly.