As you begin the estate planning process, you will want to find an arrangement that makes sense for your needs. Many people favor the simplicity and low initial outlay of wills. Yet, wills must go through probate court, and you may have significant assets that this process could diminish in value. If you want your estate to avoid probate, you may want to protect your assets in a revocable trust.
How revocable trusts work
Revocable trusts are modifiable throughout your lifetime. This arrangement allows you to make changes to your trust whenever necessary, or even revoke it if circumstances require it. After establishing your trust, you will fund it with your assets. So long as you appoint yourself as trustee, you can control these assets while you are alive. You will also need to appoint a successor trustee to fulfill this role upon your passing. Since the trust is the legal owner of your property, it will avoid probate by remaining a living entity after you die. When the time comes for your trust’s property to disburse, it will transfer to your beneficiaries based on any arrangements you stipulate.
Some people bristle at the set-up cost of revocable trusts. While you would likely spend around $150 to draft a will, you may spend $1,500 or more when creating your trust. Yet, since your trust will avoid probate, this initial outlay can lead to savings for you and your beneficiaries down the road. Keep in mind, though, that a revocable trust will not avoid the estate tax. While the trust technically owns your property, you will manage it, which makes you its owner for tax purposes.
A revocable trust can be a useful instrument to protect and pass on your legacy. An estate planning attorney can help you understand if creating one makes sense in your circumstances.