A Will is probably the most common way to transfer your assets and to protect your heirs after your death.
However, a Revocable Trust can be a better way to transfer property to your heirs and if drafted properly, it can also be valuable tool in the event you become incapacitated. A Revocable Trust can be modified or canceled anytime during your life.
What is a Revocable Trust?
It is a document wherein you, as the Settlor or Grantor, during your lifetime, establish rules for the management and distribution of your property upon incapacity or death. Any competent adult can set up a Revocable Trust and any competent adult can serve as Trustee. Most individuals serve as the initial Trustees of their own trusts and name as successor Trustees, their spouse, a relative, or a financial institution. The heirs to whom your Trust property will be distributed are the beneficiaries. Most of the time, beneficiaries are spouses, children, grandchildren, close friends, but they can also be charities.
Establishing a Revocable Trust has advantages over a will. For example:
Probate is the process whereby the court oversees the transfer of your property to your heirs. If you don’t have a Will, the state will determine your heirs by law. Probate can be an extremely time-consuming and expensive process. It can take anywhere from 6 months and up to 2 years for an estate to clear probate. The fees and costs can exceed 3% of the estate assets. A Revocable Trust can allow your heirs to receive your assets without having to submit to Probate.
Unlike a Will, a Revocable Trust allows you to provide for the management of your assets in the event you become incapacitated.
A Revocable Trust can allow a Trustee to manage property on behalf of children. In a Trust, you can instruct your Trustee at what age and under what circumstances distributions should be made to children. You can also protect their inheritance from their creditors and divorcing spouses. In a Trust, you can instruct your Trustee on the disbursement to children, including providing for college, health, and other expenses.
Remarriage and Blended Families:
You and your spouse can set up separate trusts to keep your individual property separate. You can instruct the trustee to disburse certain property directly to your children from your first relationship. This type of estate planning should also include pre or post nuptial agreements.
Probate documents, including the Will itself, becomes part of the public record. There is no requirement to file a Revocable Trust. In this way, you can keep the terms of your distribution from the general public.
Avoiding Will Contests:
A Will is always subject to challenge by your heirs. If a will is challenged, a probate court will determine the will’s validity and can interpret its provisions. A Revocable Trust is less vulnerable to legal challenge and can even include a clause disinheriting a challenging party!