New York Estate Planning & Elder Law Blog
Imagine you’ve finally met with your attorney to establish an estate plan and are now considering whether to establish a trust. Or a situation where you already have an estate plan that includes a revocable trust. In today’s world of estate planning, revocable trusts have proven to be a common but effective tool for achieving a person’s estate planning goals. This article reviews some of the important details that you should consider about the reality of revocable trusts.
# 1 – Revocable Trusts Are the Same as Revocable Living Trusts
A person can create a revocable trust during their life and maintain the power to revise the trust at any time. Revocable trusts are referred to by various names including a living trust, a revocable living trust, and an inter vivos trust. The terms of a trust are substantially more important than what a trust is called. The critical aspect that distinguishes revocable trusts from other kinds of trusts is the authority to either amend or revoke the terms of the trust.
# 2 – You Don’t Lose Control of Your Assets at the Time of Transfer
If you transfer any assets that you own to a revocable trust, you maintain control over these assets provided that you either remain the trustee of the trust, or hold onto the power to change the trust’s terms.
# 3 – Revocable Trusts Do Not Protect Assets from Creditors
After a person transfer assets to a revocable trust, that individual maintains control over these assets and assets held in a revocable trust are not protected from creditors. Certain kinds of irrevocable trusts can be established, however, that offer creditor protection. Some situations also exist where revocable trusts contain sub-trusts. Assets are then placed into subtrusts that are irrevocable trusts that protect these assets from creditors.
# 4 – After a Revocable Trust Is Created, Probate Is Still Required
Creating a revocable trust is just one step that a person must take to avoid probate. To make sure that property in a trust is not subject to probate, you also need to do various things, which include making sure either that assets are transferred during your lifetime or directed to a trust through beneficiary designation or another type of transfer mechanism.
# 5 – Revocable Trusts Should Be Used in Combination with Wills
Even if you create a revocable trust, you should consider creating a will. When revocable trusts are used in combination with wills, the will often functions as a “pour-over” will that directs any assets subject to probate to be transferred to the revocable trust so that assets can be administered through the trust document in the desired way. The person responsible for this process is referred to as a personal representative and wills function as the document that nominates this person.