Revocable trusts serve a number of purposes, including helping an estate avoid probate. Even though there are many benefits to using a trust, there are some drawbacks that could make using one a bad decision. If you are considering a revocable trust for your estate, here are some benefits and drawbacks to using one.
Probate is a process that could tie up your estate for months. In some instances, it could last over a year. However, with the help of a revocable trust, some of your assets avoid probate. As a result, your beneficiaries, or heirs, will receive their assets sooner, rather than later.
Revocable trusts also are recognized in every state unlike some other forms of estate planning. For instance, a power of attorney is not recognized in every state. Bank and brokerage houses even recognize the trusts.
The trust also helps to guard your privacy. The actions of a trust are generally considered to be private. How your assets will be distributed and the recipients of your estate will all be secret. This can help avoid family conflicts.
In addition to these benefits, the trust helps to eliminate the need for a guardian or conservator. Instead of the need to go to the court to ask that someone is appointed to oversee the estate. The trust will outline the details of how your assets should be managed and who is responsible for doing so.
A revocable trust does have issues that you and your estate planning attorney should weigh before determining whether or not it is the right move. A trust takes time and money to establish. Other means of estate planning, such as the will, can be completed in a short period of time compared to the trust. However, the will must go through probate, which can delay when your heirs receive their inheritances.
Another drawback is that since the trust is revocable, you must continue to report it on your income tax. Even though it is a trust, you still retain ownership of it. On the upside, since the trust is reported on your personal income tax return, you do not have to generate a separate return for the trust.
Review the benefits and drawbacks with your attorney before making a decision. There are other aspects to consider that might have an impact on whether the trust is the right way to handle your estate. For more information, contact a firm such as Bayer Jerger & Underwood.