A revocable trust is a trust established during lifetime that the creator of the trust has the power to change or revoke. A revocable trust becomes irrevocable upon its creator’s death. Revocable trusts can provide important estate planning advantages, but they are not a universal solution to all problems.Planning for Disability
A revocable trust facilitates management of assets if the trust creator becomes unable or unwilling to manage his or her own affairs. The trust creator can designate himself or herself as Trustee, but when it becomes necessary or advisable for someone to take over management of the trust creator’s affairs, a co-trustee or successor trustee will be available to continue management.
Minimizing Probate Delay and Expense
Probating a Will in Maine is generally neither expensive nor burdensome. However, a revocable trust can minimize even the streamlined modern probate process. Assets that are transferred into a trust during the trust creator’s life are not subject to the probate process. If most assets are transferred into trust during life, a “pour over” Will can add any remaining assets to the trust at the trust creator’s death so all assets become assets of the trust.
The Trust Creator Can Decide How Assets Will Be Used After His or Her Death
A trust creator by the specific terms of the trust document designates how assets in the trust are to be used after the trust creator’s death. A revocable trust that becomes irrevocable at death can be used to provide for several generations of beneficiaries.
A Revocable Trust Does Not Avoid Estate Taxes
Establishing a revocable trust will not help to avoid estate taxes. Trust assets are not included in the trust creator’s probate estate, but they are included in the trust creator’s taxable estate. The IRS considers assets within a revocable trust to remain in the control of trust creator. Trust assets therefore are taxed as if they still belonged to the trust creator.
Do You Need a Revocable Trust?
If you would like to provide for a smooth transition of management of your affairs when you no longer can manage assets for yourself, or if your assets are such that probate of your Will may become complicated, you may wish to consider a revocable trust. On the other hand, if your estate is limited and you have provided a power of attorney so someone can act for you with respect to financial affairs, or if you do not wish to deal with the complexity of a trust, a revocable trust may not be for you.
We welcome the opportunity to discuss the particulars of your own situation in order to devise an estate plan that works best for you.