Estate Planning

5 Things to Know About Revocable Trusts

by Alli Thomas

Jan 12, 2021

Have you been wondering if you should set up a revocable trust? If you ask around, you may get different answers. Today, we’ll take a quick look at who would typically benefit from this type of estate planning vehicle and review some facts about them.

 

Do you REALLY need a revocable trust?

There is no blanket answer to this question. Some estate planners think everyone should have one; others say it’s not necessary.

In general, a revocable trust is beneficial for:

  • Business owners
  • People who own homes in multiple states
  • People who prioritize privacy
  • People who want to avoid probate.

If your financial simpler, a revocable trust may be overkill.

Also, a revocable trust is not a substitute for a will. Even if you set up a revocable trust, you should still have a separate will covers all of your other assets and belongings.

 

Now, let’s look at five more important facts about revocable trusts:

  1. A revocable trust will not allow you to avoid estate tax. By its very nature, a revocable trust lets you keep control over your assets. That means that, in Uncle Sam’s eyes, your assets remain in your estate. If you want to avoid estate tax, investigate an irrevocable trust instead.
  2. As mentioned above, assets in a revocable trust do not go through the probate process–they are passed right to your beneficiaries. This is the key difference between a revocable trust and a will.
  3. You may name yourself as the trustee of your revocable trust, which allows you to retain control over your assets. If you are concerned about the fate of your trust in the event of becoming incapacitated (or dying), you may also choose to name a successor trustee–or the person who will take over your trust for you.
  4. A revocable trust allows you to keep details of your assets under wraps. Unlike a will, which is public record after your death, a revocable trust is a private document.
  5. The assets in a revocable trust are still subject to creditors even if they are not held in your name. If you’re looking to protect your assets from creditors (or from lawsuits), consider establishing an irrevocable trust.

2020 has pushed estate planning to the fronts of many people’s minds. If you’d like to discuss your options, one of our advisors is here to help. Click here to set up a no-cost, no-obligation meeting with them.

 

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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