Revocable Trusts: What Is a Revocable Trust and Do I Need One?

What is a Revocable Trust?

A revocable trust, sometimes called a living trust, is a legal document created during your lifetime where you name a trustee to manage assets you transfer into the trust for your benefit during your lifetime. The person who creates the trust is called the grantor or settlor. The trustee manages the assets for the benefit of the grantor and any other beneficiaries named in the trust.

With a revocable trust, you maintain control over the assets. You can change the trust terms or revoke the trust at any time as long as you have capacity. The assets in the trust avoid probate when you pass away because you’ve already specified in the trust document who inherits the assets. This helps ensure your assets transfer immediately to beneficiaries without court intervention.

To fund a revocable trust, you change title of your assets from your personal name to the name of the trust. Trust assets can include real estate, financial accounts, vehicles, personal property, investments and more. You still file your own tax returns and pay taxes on trust income and assets like normal during your lifetime.

A revocable trust only becomes irrevocable upon your death or if you become mentally incapacitated. At that point, the trustee manages the trust for beneficiaries according to the trust terms.

Avoiding Probate

A revocable trust can help you avoid probate, which is the court-supervised process for administering a deceased person’s estate. Here are some of the key benefits of avoiding probate with a revocable trust:

• Speed: Assets in a revocable trust can be distributed much faster, often within weeks, compared to the months (or even years) it can take to probate a will. This faster distribution helps provide more timely access to assets for beneficiaries.

• Privacy: Probate records are public, so anyone can find out the details about your assets, debts, heirs, etc. A revocable trust avoids this lack of privacy since trust assets are distributed privately.

• Less court intervention: You need to go through the probate court to validate a will, whereas a revocable trust functions without the court’s involvement. This can be less stressful for family members.

• Lower costs: Probate can incur court fees, executor fees, attorney fees, etc. A revocable trust can have lower administrative costs, though you still need a lawyer to set it up properly.

• Out-of-state property: Probate is needed in every state where you own property, while a revocable trust can simplify control over assets in multiple states.

So in summary, a revocable trust can provide faster, more private, and lower-cost estate administration..

Maintaining Privacy with a Revocable Trust

Unlike a will that goes through probate, a revocable trust allows you to keep your assets and distribution wishes private. Probate proceedings are public, meaning anyone can find out what assets you had and who your beneficiaries are.

A revocable trust avoids this loss of privacy since it doesn’t go through probate. The trust document and all its details remain private. Only the beneficiaries you name in the trust will know about the assets and distributions. This is especially beneficial for those who value their privacy or have concerns about information getting into the wrong hands.

With a revocable trust, you don’t have to worry about nosy neighbors, old friends, or potential scammers looking up your will in probate records. The trust allows you to keep your financial situation and estate plans confidential. This gives you greater control and peace of mind over who finds out what about your assets.

Maintain Control Over Your Assets

A revocable living trust allows you to maintain control over your assets while you are still alive. With a revocable trust, you can continue to manage the assets you place in the trust, buying and selling as you see fit.

The assets in a revocable trust are still considered your personal assets. You can change the terms of the trust, add or remove assets, or even revoke the trust entirely if your circumstances change. This level of control is very different from an irrevocable trust, where you permanently give up ownership of the assets.

A revocable trust only transfers assets to beneficiaries after your death. So you don’t have to worry about losing control of your property as long as you are living. You can continue to use the assets and derive income from them.

Maintaining control over your assets can provide significant peace of mind. You don’t have to worry about an illness or disability taking away your financial independence. The terms of the revocable trust are entirely up to you.

With a revocable trust, you get to decide who will manage your assets if you become incapacitated. You can name a trusted person as your successor trustee to step in and manage the assets according to your wishes. This level of control is preferable for many people compared to a court-ordered conservatorship.

Overall, a revocable living trust allows you to maintain maximum flexibility and control while still planning for the future. The assets remain yours to manage during your lifetime.

Cost Savings

A revocable trust can help save significantly on probate costs compared to not having a trust. Probate is the court-supervised process for administering a deceased person’s estate. It involves filing various legal documents, having an executor appointed, inventorying assets, providing notice to creditors and beneficiaries, paying debts and taxes owed, and distributing remaining assets to beneficiaries.

This process can be quite costly depending on the size of the estate and the state you live in. Probate fees could include court costs, legal fees, executor fees, appraiser fees, and more. These expenses are paid from the estate assets before distribution to heirs.

With a revocable trust, your assets are transferred to beneficiaries privately without probate. So those court costs and legal fees can be avoided. The only probate fees incurred would be for any assets not transferred to the trust before death. Overall, a trust allows more assets to go directly to beneficiaries rather than paying administrative expenses.

In Illinois, probate fees could potentially consume 5% or more of an estate’s total value without a trust. For larger estates, the savings from avoiding probate with a trust could be tens of thousands of dollars or more. A revocable trust is an excellent way to maximize the inheritance you leave behind for loved ones.

Convenience

A revocable living trust can save your loved ones significant time, effort, and hassle after your passing compared to probate. With a properly funded revocable trust, your assets transfer immediately to beneficiaries upon death, without court intervention. This avoids the inconvenience and delay of the probate process, which can take 6 months to 2 years in Illinois.

Your successor trustee can start managing the trust assets and distributing them to beneficiaries right away. Beneficiaries don’t have to wait for probate to close to access inheritance funds. This provides immediate relief and financial support during a difficult time.

Meanwhile, probate requires extensive paperwork, court filings, hearings, inventory of assets, creditor claim periods, and more formalities. This imposes heavy burdens on grieving family members already struggling with loss. A revocable trust simplifies the settlement process and allows loved ones to focus on healing.

With a trust, you also avoid the public nature of probate. Trust documents remain private, while probate records become public documents. For individuals valuing privacy in estate planning, a trust offers major advantages over probate.

Overall, a revocable trust delivers immense convenience compared to probate. It eases the administrative burden on family and accelerates inheritance payouts, providing critical financial support when loved ones need it most. This convenience factor alone makes revocable trusts extremely useful estate planning tools for Illinois residents.

Asset Protection

A revocable living trust can provide some asset protection benefits that a will cannot. With a revocable trust, the grantor’s assets are legally transferred into the trust during their lifetime. This can help shield assets from creditors in certain situations.

For example, let’s say someone gets sued or files for bankruptcy. If their assets are owned in a revocable trust, those assets are legally owned by the trust and may be out of reach from creditors. The creditors would generally only be able to access the assets that remain in the person’s individual name.

This asset protection can be advantageous compared to simply having a will. With a will, the assets are still legally owned by the individual until death. So creditors could potentially access more of the assets before they get transferred to beneficiaries.

A revocable trust therefore allows granting asset protection for the grantor while still maintaining full control over the assets during life. Upon death, the assets transfer directly to beneficiaries according to the trust instructions, without the need for probate. This can make it faster and easier for beneficiaries to access inherited assets.

So while the asset protection of revocable trusts is not absolute, it can provide more protection compared to not having any estate plan at all. This is a key potential benefit to discuss when considering a revocable living trust.

Avoiding Conservatorship

A revocable trust can help you avoid the need for a court-supervised conservatorship in case of incapacity. If you become incapacitated without a revocable trust, the court may need to appoint a conservator to manage your assets and make decisions on your behalf. The conservatorship process can be public, time-consuming, expensive, and may not reflect your wishes.

With a revocable trust, you can designate a trustee to step in and manage the trust assets if you become incapacitated. The trustee has a fiduciary duty to manage the assets according to the terms you outlined in the trust. This private process allows your wishes to be carried out quickly and avoids the need for a conservatorship.

The trustee can pay bills, handle investments, collect income, and make distributions according to your instructions. Appointing a competent trustee and outlining clear instructions for asset management in the trust document ensures your interests are protected if you become incapacitated. Compared to a court-supervised conservatorship, a revocable trust provides a simpler, less costly, and more private means of asset management if you are unable to handle your own affairs.

Seamless Asset Transfer

A revocable living trust allows for a smoother transfer of assets when you pass away. Unlike assets that are distributed through probate, the assets in a revocable trust can be immediately distributed to the beneficiaries named in the trust upon your death.

The assets in the trust do not need to go through the probate process, which can take months or even years in some cases. This speeds up the distribution and gives your loved ones access to the assets sooner when they likely need it most.

With a revocable trust, you also avoid the delays that can happen if a will goes through probate and is contested by heirs or claimants. The assets in the trust are distributed exactly according to your wishes, without the risks associated with probated assets.

In addition, the successor trustee you appoint can start managing the assets and making distributions right away after your death. They don’t need to wait for court appointment like an executor of a will does.

Having a revocable living trust makes the transfer of assets after death much smoother and faster for your loved ones. It’s one of the key benefits that makes revocable trusts an attractive estate planning option for many people.

When a Revocable Trust Makes Sense

A revocable trust can be a smart option for certain individuals and families in Illinois. Here are some situations where creating a revocable trust is often recommended:

• You have a moderate to high amount of assets – Generally, experts suggest considering a revocable trust once your net worth exceeds $100,000. This includes real estate, investments, cash accounts, businesses, etc. With more assets, the probate process can become lengthy and costly without a trust.

• You own real estate in multiple states – If you have property in different states, probate after your death would likely need to be opened in each state. A revocable trust lets all properties transfer together.

• You have concerns about long-term incapacity – A revocable trust can outline your wishes if you become incapacitated and ensure a smooth transition of asset management. This avoids the need for court-supervised conservatorship.

• You have minor children or heirs with special needs – The trust can designate assets to be held for beneficiaries until a certain age or managed to meet special needs. This level of control isn’t available without a trust.

• You have privacy concerns – Trusts aren’t public record like wills in probate court. The details and contents remain private.

• You own a business – Business interests can transfer seamlessly to heirs without disruption. The business can continue operating through the revocable trust.

• You have a blended family – For married couples who remarry and have children from previous relationships, trusts can ensure assets are allocated as you intend.

• You have comprehensive estate planning needs – Beyond a simple will, trusts allow robust estate planning and asset protection strategies.

In short, a revocable living trust can benefit many people in Illinois who have significant assets or complex planning needs. Speaking with an estate planning attorney is the best way to determine if a trust aligns with your financial situation and goals.

 

DISCLAIMER

The information provided on this blog is for general informational purposes only. It is not intended as legal advice and should not be construed as such. The content of this blog is not a substitute for obtaining legal advice from a qualified attorney licensed in your state. If you require legal advice, please consult with a qualified attorney in your state. LaCava Law Firm, LLC assumes no liability for any errors or omissions in the content of this blog or for any damages arising from your use of the blog under any circumstances. While we strive to provide accurate and up-to-date information, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the information contained on this blog. Any reliance you place on such information is strictly at your own risk. No attorney-client relationship is formed by reading or interacting with the content on this blog. The transmission of information to or from this blog does not create an attorney-client relationship between you and Attorney Michael LaCava.