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Revocable Trusts: The Swiss Army Knife of Estate Planning

By William D. Block of Block Legal Services, LLC posted in Trusts on Monday, January 9, 2017.

A trust can accomplish nearly everything you might want to do with your estate plan, helping you avoid court entanglement while giving you precise control to make sure that every detail of your intentions can be carried out.

In this post I will be expanding on the first half of the 6 Advantages of Trusts: flexibility, control, and probate avoidance.

When a will is used to transfer assets, all the assets must go through the court system. Once this court process is complete (which can take many months or even years), the new beneficiary is now the outright owner of the property. Sometimes this is exactly what you might want, but other times it might be better to delay or stagger the bequests. For example, you might not want a 21-year-old child to have full and complete access to their inheritance, or you might want a beneficiary to receive three smaller distributions staggered over several years instead of one large windfall. People are more likely to spend irresponsibly if they get a large chunk all at once, and often make wiser decisions with smaller distributions.

The best way to postpone gifts is through a trust. It is possible have a will create a trust, but to do this the entire estate would have to go through the probate court. Instead, it is often much easier and less complicated to create a trust while you are still around. This type of trust is called a revocable trust, because you can change or revoke it at any time. Creating a trust allows for the delay of distribution while also skipping the court process. This is especially useful for assets that already skip the probate process, such as life insurance policies or accounts with payable-on-death designations.

A revocable trust can also be less expensive in the long run than using a will - setting up a trust while you're alive is almost always less expensive than hiring a probate attorney.

In addition, holding assets in a trust allows for those assets to be used before the ultimate distribution is made. Common uses include medical and educational expenses. What this means is that you can make sure your beneficiaries have access to money for things that you think are really important without giving them the ability to spend the money frivolously.

Though they may not be the right choice for every situation, a revocable trust offers a unique variety and combination of tools that can accomplish more than other estate planning tools. When thinking about the options for your estate plan, knowing about the benefits of a revocable trust is an important step.

In my next post, I will discuss some protections available through other types of trust.