Should You Have A Revocable Trust?

March, 2006

A revocable (or “living”) trust is one you create during your lifetime, retaining the right to amend or revoke it during your life. Upon your death, the trust usually provides a format for distributing trust income and assets to the beneficiaries you have named, and thus acts as a “will substitute” with respect to trust assets. It can produce significant advantages. Property titled in the name of the trust avoids probate, for example.

For an elderly or disabled person, a revocable trust is an excellent vehicle to enable another person, serving as trustee, to handle his or her financial and administrative affairs, subject to a continuing right to hire and replace the trustee.

A revocable trust is not an answer to all planning problems, however. It does not avoid estate taxes (although it can be designed to fit into an overall estate plan that does). A revocable trust does not avoid creditors’ claims, nor does it remove property from consideration when applying for Medicaid or other “means-tested” assistance programs.

If you adopt a revocable trust, it is most important to follow up by retitling property in the name of the trust, and to see that property purchased later, or the proceeds of any property that is sold, remains in the name of the trust. For this reason, we are less inclined to suggest a revocable trust to a younger client with a rapidly growing or changing portfolio.

Is a revocable trust for you? Let’s talk about it.