Trusts come in different forms. Some are irrevocable, some are revocable. Some trusts transfer wealth from generation to generation, while others focus on probate avoidance. One of the most popular trusts is the revocable trust. It’s popular because of the advantages it offers. Like anything, though, revocable trusts have a few disadvantages also.
Revocable Trusts: The Basics
Like all trusts, a revocable trust is established and funded by someone referred to as a grantor or settlor. A trust documents sets out the details of the trust. The trust is funded by the grantor, then managed by the trustee. At least one beneficiary reaps a benefit from the trust.
Unlike irrevocable trusts, revocable trusts are fairly easy to change.
And Some Disadvantages
People seeking to add a revocable trust to their estate plan also must consider some of the disadvantages, including:
- Front-End Expense. Creating a trust typically is more expensive than writing a Will. However, using a trust-based estate plan usually saves money because the trust assets transfer to heirs without going through probate.
- Fewer Tax Advantages. Other trusts and financial plans are more likely to lower the grantor’s tax bill than a revocable trust.
- No Asset Protection. Since the grantor still controls the trust assets, they remain vulnerable to the grantor’s creditors and to civil judgments. An irrevocable trust may be a better option is asset protection is a concern.
Generally, the grantor of a revocable trust should frequently review his or her estate plan. Changes to laws, family circumstances, or finances could lead to altering, replacing, or eliminating the trust.
For example, Gary and his wife, Elaine, prepared an estate plan several years ago. At the time, they chose to go with a Will-based plan. However, their attorney recently suggested they set up a revocable living trust specifically to avoid probate. As they considered the pros and cons of revocable trusts, they realized that at this time a revocable trust was a great option for them.
Trusts are Complex
Schedule a consultation with one of the attorneys at Miller Estate and Elder Law Find out whether a revocable trust will work for you. Our phone number is 256-251-2137, or you may want to use the Contact Form on our website. We have offices in Anniston and assist clients in communities like Hoover, Vestavia Hills, Irondale, and Calera.