How Does a Revocable Trust Fit into My Estate Plan?

When you create an estate plan, one of the most powerful tools at your disposal is a revocable trust which can streamline the management and distribution of your assets, avoid probate, plan for incapacity, and provide you with flexibility during your lifetime. Understanding how a revocable trust works and how it complements other elements of your estate plan is essential to crafting a comprehensive strategy for your legacy. To help you better understand, the Indianapolis attorneys at Frank & Kraft explain how a revocable trust fits into your comprehensive estate plan.

What Is a Revocable Trust?

A revocable trust is a legal entity that allows you to designate a Trustee who will protect and manage assets held by the trust that are intended for the benefit of others (the “beneficiaries”). All trusts fall into one of two categories: living or testamentary. A testamentary trust is not administered until after the death of the Grantor and is activated by a term in the Grantor’s Last Will and Testament. A living trust, as the name applies, is administered during the Grantor’s lifetime. A living trust can also be revocable or irrevocable. If the trust is revocable, the Grantor can modify or terminate the trust at any time and for any reason. By contrast, an irrevocable living trust cannot be modified or terminated for any reason by the Grantor after the trust is created.

Distributing Assets Using a Revocable Trust

A revocable trust can be used to manage and distribute your assets according to your wishes both during your lifetime and after your death. There are numerous reasons why you might want to use a revocable trust to distribute assets during your lifetime, including charitable gifting and protecting vulnerable beneficiaries. For example, you might want to use a trust to distribute assets to several charities each year, making use of the annual exclusion or appoint a professional Trustee to manage assets for a beneficiary who has addiction problems or a tendency to be a spendthrift.

Avoiding Probate with a Revocable Trust

Unlike a Last Will and Testament, assets held in a revocable trust do not go through probate, which can save time and reduce expenses for your beneficiaries. Probate can be time-consuming, expensive, and public, creating potential complications for your loved ones; however, by transferring assets into a revocable trust, they become trust property and are no longer subject to probate. Upon your death, the Successor Trustee can immediately begin managing and distributing trust assets in accordance with your instructions, avoiding delays and unnecessary costs. If you own real estate in multiple states, for example, having a revocable trust allows you to avoid the need for ancillary probate proceedings in each state which can significantly simplify the estate administration process for your heirs.

Incapacity Planning with a Revocable Trust

As the Grantor of the trust, you name yourself as the Trustee and name someone you wish to take over control of your assets in the event of your incapacity as the Successor Trustee. Major assets are then transferred into the trust and because it is a revocable trust, assets can easily be transferred in and out as needed. As the Trustee, you control those assets while you are capable; however, if you become incapacitated, control over the trust assets automatically shifts to the Successor Trustee without the need for court intervention. This ensures that someone of your choosing takes over control of the trust assets during your incapacity.

Providing Flexibility and Control During Your Lifetime

A revocable trust offers unparalleled flexibility because as the Grantor, you can add or remove assets, change beneficiaries, or modify the terms of the trust at any time. This flexibility is particularly beneficial if your financial circumstances or family dynamics change. Ultimately, the way a revocable trust fits into your plan depends on your goals. For example, if you want to ensure privacy, provide for a blended family, or set conditions on how and when beneficiaries receive their inheritance, a revocable trust can be customized to meet your needs.

Can We Help You Incorporate a Revocable Trust into Your Estate Plan?

For more information, please join us for an upcoming FREE seminar. If you need assistance incorporating a revocable trust into your comprehensive estate plan, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.

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