If you want to stay in control of your assets while making things easier for your family down the road, a revocable trust may be the right tool. This type of trust allows you to organize your estate without giving up control over your property. You continue to manage your assets as you always have, but transferring formal ownership to the trust provides you with benefits now and in the future.
Many people assume trusts are only for the wealthy or for complicated estates. In reality, a revocable trust can serve a wide range of families. If you have questions about how this option might work for you, reach out to a Bethlehem revocable trusts lawyer today.
What Is a Revocable Trust and How Does it Work?
A revocable trust is a legal document that holds your assets during your lifetime and determines what happens to them if you are incapacitated or pass away. With this type of trust, the person who creates it generally also acts as the trustee during their lifetime. This means you not only determine what property is held by the trust but also what happens to it while you are alive.
Trusts offer a lot of flexibility, in that you can name someone else as the successor trustee when you are no longer able to serve in that role. Your trust will also have beneficiaries, which are parties that inherit from you after you die. While you are alive and competent, you can live your life as if those assets were still in your name.
How Revocable Trusts Differ from Irrevocable Trusts
When you create a revocable trust, you keep control of your assets for as long as the trust lasts. You can amend the terms, change beneficiaries, replace the trustee, or cancel the trust entirely, and you don’t have to ask permission from the court to do so. One of the downsides is that the assets in a revocable trust are still legally your property. This means if you face a lawsuit from a creditor, they might be able to reach the trust assets if their claim is successful.
An irrevocable trust works differently in that you give up direct control over the assets you transfer into it. You cannot freely change the terms or take the property back simply because you changed your mind. A separate trustee manages the assets under the rules written into the trust document. Because you surrender ownership, the law often treats those assets as no longer yours. That shift can create asset protection benefits or remove property from your taxable estate, but it also limits your flexibility. While there is still a path to altering or terminating an irrevocable trust, this process is often complicated. Typically, you will either need a court order or the permission of all of the beneficiaries to make any changes.
How Do Revocable and Living Trusts Differ?
When going through the estate planning process, you are likely to hear the terms “revocable trust” and “living trust” used as if they mean different things. That said, they generally describe the same arrangement. A living trust is simply a trust you create during your lifetime, rather than one that forms after your death through a will.
Most living trusts are revocable, which means you can change or cancel them while you are alive and competent. The important question is not whether the trust is “living,” but whether you retain the power to amend it. If you do, you are dealing with a revocable living trust.
Benefits and Limitations of Revocable Trusts
There are a lot of reasons why you might benefit from using a revocable trust, but it is not the right tool for every situation. Some of the benefits and drawbacks our Bethlehem revocable trusts lawyer team can advise you on include the following:
Benefits
Some of the major benefits of revocable trusts include:
- Probate Avoidance. Assets properly titled in your trust pass outside of the complicated probate process. This is important for your heirs, as they can skip the costly, time-consuming process of appearing in probate court.
- Continuity. If you become incapacitated, your successor trustee can step in immediately without the need for a court hearing. Your family does not need to petition the court for guardianship to manage trust assets in order to ensure your wishes are respected.
- Privacy. Probate filings become part of the public record, but the process of administering a trust is done in private.
- Control Over Distributions. You can structure distributions to children or other beneficiaries over time rather than leaving everything outright.
Limitations
Despite all of the positive aspects of a revocable trust, there are some downsides to consider. For example, these trusts will not protect your assets from the reach of creditors if you are sued. They also cannot be used to help you shrink your estate in order to qualify for Medicaid. If you are at risk for federal estate tax liability, these trusts will not help with that either. Despite these downsides, there are countless circumstances where they are the ideal estate planning tool.
When a Revocable Trust Makes Sense in an Estate Plan
Revocable trusts are useful as long as you do not have specific goals that can only be accomplished by some other estate planning tool. For example, they are ideal if you want to help your loved ones avoid probate. However, you might need to go with a revocable trust if you are more concerned about tax obligations or shielding assets from creditors.
Reach Out to Leeson Estate Planning to Discuss Your Revocable Trust
There are a lot of different options during the estate planning process, but revocable trusts are especially popular. If you have questions about how they might work for you, reach out to a Bethlehem revocable trusts lawyer today for a private consultation.
Frequently Asked Questions
What is a revocable trust in Pennsylvania?
In Pennsylvania, a revocable trust is a legal arrangement you create during your lifetime that holds your assets and directs how they are managed and distributed.
Can I change or cancel a revocable trust?
You can change or even terminate a revocable trust at any point, and you don’t need court approval to do so.
Does a revocable trust avoid probate?
Yes, but only for assets properly funded into the trust.
Do I still need a will if I have a revocable trust?
It is a good idea to have a last will and testament even if you have a revocable trust. The terms of your will can work hand-in-hand with a trust and often play a big part in avoiding probate.