Like most estate planning devices, a revocable living trust is not right for every estate. A recent article discusses several of the pros and cons of creating a revocable living trust.
A revocable living trust is a trust that a person establishes during their life with their own assets. The terms of the trust can be modified, and the trust may be terminated before the creator’s death.
It is important to note that a revocable living trust provides no tax benefit to the creator or the creator’s heirs. Any assets in a revocable living trust are included in the creator’s estate for the purposes of calculating estate tax. The creator’s creditors can also reach assets in revocable trusts.
The major reason why many people choose to set up revocable trusts is that they wish to avoid probate. By setting up a revocable living trust, people can pass their assets to their heirs outside of probate. While wills become public record once they are probated, assets that pass through trusts remain private.
While probate in New Jersey doesn’t tend to be a big deal, estates can have their assets frozen if they are bigger than $675,000 until the state issues waivers, which can take up until 18 months after the date of death. A revocable living trust avoids the wait, and makes it far easier for beneficiaries to receive distributions after you die.
Revocable trusts are also beneficial to those who have significant assets and need assistance managing them during your lifetime. By placing such assets into a revocable trust and naming yourself co-trustee along with a financial professional, you can stay in control of your assets while also utilizing the assistance of a professional.
Related Blog Post: Why A Living Trust is Better Than a Simple Will