When planning one’s estate, one can set up many types of trusts for their beneficiaries. A revocable trust gives the grantor, otherwise known as originator, flexibility in life to determine how much money goes into the trust at various points throughout their life. Money is not distributed from the trust until after the originator’s death.
What are the benefits of a revocable trust?
One of the main benefits of a revocable trust is that the provisions of the trust can be changed, and it provides income to the originator. Basically, a revocable trust can be changed right up until the time of the grantor’s death.
Revocable trusts help the beneficiaries avoid probate court or fights over guardianship of the remaining estates. Upon the grantor’s death, everything in the trust gets transferred over to the beneficiaries.
If one or more of the beneficiaries are minors at the time of the grantor’s death, then their estate is held in the trust instead of being appointed guardianship. No one can touch the trust except for the beneficiary at the time of turning 18.
There are also more rules that can be implemented. In estate planning, grandparents or parents might use a revocable trust so that they can set rules for the beneficiary, such as only allowing a certain amount of money to be used from the trust each year.
What are the downsides of a revocable trust?
It requires a lot more time and continuous maintenance. All assets included in the trust must be evaluated annually to determine their value, and the costs of maintaining a revocable trust are higher. It also does not replace a will.
Estate planning recommendations vary on a case-by-case basis. To make sure all of your needs are met, you may want to consult with an estate planning attorney.