Revocable Trusts:
A revocable inter vivos ("living") trust is a contract in which a person (the "Trustor") transfers his or her assets to a person (the "Trustee") who agrees to own, administer, and distribute those assets (the "trust estate") to designated persons (the "beneficiaries") according to the provisions of the written trust instrument ("Declaration of Trust" or "Trust Agreement"). Initially, the Trustor, the Trustee, and the beneficiary are usually the same person, and the trust names successor trustees and successor beneficiaries.
Benefits: The primary benefits of a trust are as follows:
- Avoid Probate: Assets held in the name of a Trustee are not subject to probate upon the death of either the Trustor or the Trustee (even if you are both the Trustor and the Trustee of your own trust). The expense and delays associated with probate proceedings are avoided as to trust assets.
- Avoid Guardianship Proceedings: A trust can provide that the designated successor trustee will manage the assets and provide for the care of the Trustor when the Trustor becomes incapacitated or incompetent. A trustee can be directed to retain funds for beneficiaries who are young or immature, incompetent, unwise, or easily influenced by greedy people. This eliminates guardianship proceedings, including the annual court accountings required by law. If done properly, a beneficiary cannot compel an early distribution of--and his creditors cannot place a lien on--trust assets.
- Other Benefits: A revocable trust can be used to consolidate all of the Trustors assets, including benefits from life insurance policies, retirement benefit plans, and other contracts. It can include provisions which optimize the marital deduction, charitable gifts, and generation-skipping transfers in order to reduce or eliminate a Trustor's federal gift and estate taxes. A trust can be used as a form of a marital property agreement if established after a marriage, or it can help segregate separate property if established before a marriage.
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