Should a Trust Be Part of My Estate Plan?

A revocable trust can be a wise choice for managing your assets, says nj.com’s recent article entitled “What are the advantages of putting assets into a trust?”

A revocable trust is a type of trust that can be changed once it is executed by the creator of the trust, known as the grantor. During the life of the trust, income earned is distributed to the grantor. After his or her death, the trust assets transfer to the beneficiaries of the trust.

A revocable trust can be advantageous because it has flexibility and provides this income stream and full access to the trust principal by the living grantor (also known as the trustor).

If you are the grantor, you can act as trustee, by yourself or with another as co-trustee (like a spouse).

When you no longer want to manage, or when you’re unable to manage your affairs, the co-trustee or a successor trustee can take over all of the duties. This can be done without any State or court involvement.

If you didn’t put your assets in a revocable trust, you’d need to appoint an agent under a durable power of attorney to handle your financial affairs, if you become incapacitated. But your agent will generally have broad authority to whatever they want with your assets. A trust, however, created a legal obligation to use your assets for your care while you are incapacitated.

Some financial institutions would also rather do business with a trustee instead of an agent under a power of attorney.

At your death, if all of your assets are in trust, your family can avoid the probate process. The trustee continues to manage the trust assets pursuant to the terms of the trust document. Those instructions do not need to be recorded any court in most jurisdictions.

Unlike a will, which is recorded with the government once it is probated, a trust is not a public document in most jurisdictions. Therefore, privacy is another advantage of a trust.

Finally, in states where an inheritance tax return is required, a revocable trust also avoids the need to obtain tax waivers, which are issued by the state to release any tax liens, upon death.

However, there are some things to consider when putting assets into a trust. One is the cost, there may be slightly more up-front cost over having a Will prepared, but it will save much more in the long run.

Talk to your estate planning attorney about the pros and cons for your individual situation.

Reference: nj.com (March 17, 2021) “What are the advantages of putting assets into a trust?”