What is a Revocable Trust?
A revocable trust is created when a grantor transfers assets to a trustee for the benefit of a beneficiary.
The main purpose of a revocable trust is to transfer your assets to your loved ones, a charity, or any beneficiary of your choosing. It’s tempting to procrastinate thinking about end of life decisions, but eventually the time will come when you need to disperse your assets to others.
Historically, most people have used a will to show “testamentary intent” – what you intend to happen to your property once you pass away.
The revocable trust, however, is a more modern way to create a testamentary instrument that has much more flexibility than a will. It enables more privacy than a will, could save you hundreds to thousands of dollars, as well as many unnecessary hours in court.
How a Revocable Trust Can Save You Time and Money
When you use a will to pass your property to another, those you leave behind will have to follow certain legal steps that would not be necessary if you had formed a revocable trust instead.
A will with assets in excess of $166,000 must be processed in probate court before your beneficiaries can have access to your property. Part of the probate process involves completing extra forms just to allow the court to look into the matter!
Beyond this, your beneficiaries will have to fill out even more forms to get the court to allow a representative (called an “executor”) to act on your behalf and distribute your property.
In California, the executor is allowed up to one year to complete probate. This time period is extended to 18 months in the case where Federal estate tax must be filed. This can cause a host of problems for your beneficiaries who need access to your resources much sooner.
With a revocable trust, you can decide ahead of time who gets your property, how much is to be transferred, and at what point in time the resources are to be transferred. This is a more exacting way to transfer your assets, and will save a significant amount of time compared to the time spent probating your estate.
Save Money by Avoiding Expensive Probate Court Fees
Probate court fees are high and will cut into the value of your estate. In probate court, you may have to pay court filing fees, executor fees, appraisal costs, legal fees, surety bonds, and accounting fees – in total these can amount to 5 – 7% of your estate’s value!
With a revocable trust, you appoint a trustee ahead of time to manage your property for you. There is no need to petition the court to approve an executor, like there is with a will. Although most trusts are set up to allow the trustee reasonable compensation for their efforts in administering the trust, these amounts are minor compared with the savings you’ll achieve by staying out of probate court.
How a Trust Protects Your Privacy
When you use a will instead of a revocable trust, the probate court will have to supervise the transfer of your estate to your beneficiaries. Even if your will appoints an executor of the estate, this executor still has to be approved by the probate court.
If the executor you appointed in your will is no longer living, or is unable or unwilling to serve, the court will appoint an independent administrator to execute the will. In the event you do not have a close relative able to serve, the court-appointed administrator in charge of dispersing your assets may be a complete stranger.
Further, probate hearings are held in open court where any member of the public has a right to attend, which takes away your privacy entirely.
With a revocable living trust, on the other hand, your appointed trustee can privately administer your trust without court involvement, and without public hearings. This keeps the details of your money and other property you own far from the public’s eye.
How to Create a Revocable Trust
A revocable trust is a legal instrument that must comply with state law. Many forms are available for sale on the internet but are confusing and difficult to fill out, take an exorbitant amount of time, and do not take into account the particularities of your unique situation.
Moreover, if you fail to create a legally enforceable revocable trust, or leave something out that is essential to preserve your wishes, this can have drastic financial consequences to your estate, and to the lives of your beneficiaries.
You can save yourself the headache, and the potentially drastic, unintended consequences, by working with a trusted attorney to create your revocable trust for you. At Denni Law, Inc., we create your revocable trust and other estate planning documents quickly, affordably, and professionally.
Save yourself and your family the time, expense, and emotional hardship that would occur by making grave estate planning mistakes. Create your estate plan the right way, so you can have the peace of mind you deserve.
At Denni Law, Inc. we help you create your estate plan in small, simple steps. Just click below to get started today.