No matter what your economic status may be, having an estate plan is a great idea. For people, fortunate enough to have established significant wealth for themselves and their families, it is certainly important to have a plan. One way to protect your family’s future is by creating a revocable family trust. Your estate planning attorney can help. Before you get started, here are six things you should know about a revocable family trust.
1. Why you should include a revocable family trust in your family wealth planning
When clients are looking to preserve their financial wealth, wills, trusts, powers of attorney and other planning strategies can be used for family wealth planning. These tools and many others can be used to create a comprehensive plan with immeasurable benefits. While there are many different ways to protect your family wealth, a revocable family trust is one that you should definitely consider. A revocable family trust is very flexible and quite effective in family wealth planning. Property transferred to a revocable family trust that has been properly drafted can have amazing benefits.
2. A revocable family trust is not just rich people
A family trust is beneficial to those who want to protect their families from unnecessary probate fees, attorney’s fees, court costs and federal estate taxes. It can also be useful in providing substantial protection for your family, regardless of the value of your estate. A revocable family trust can also protect spouses in the event of remarriage, when one spouse has died. It can provide better protection for children and grandchildren, as well.
3. How a trust generally works
A trust is simply an agreement between three parties: the trustor or owner of the assets in the trust, the trustee, and the beneficiary. The trustee is the person to whom the trustor transfers legal title of the trust property. The beneficiary is the person who will ultimately receive the trust property after certain conditions have been met. A trustee can be a relative, friend, attorney or accountant. There are also certain organizations that offer trust services, including supplying trustees to manage the trust.
4. How to modify a revocable family trust
There are two primary methods for modifying a revocable trust: either through an amendment or restatement. You could also choose to revoke the trust entirely, but it is often more complicated because the property has already been transferred. You will need to transfer the property again to the new trust. No matter which method you choose to make changes to your trust, it is important that you understand the state laws that govern your particular trust. That is the only way to ensure that your amendment or restatement will be valid.
5. Amending your trust may be a good idea
Depending on the situation, an amendment could be the best option for you. For instance, when you get married or have a new baby, or when you have a significant change in your trust property. In those situations, an amendment will likely be sufficient. If your beneficiaries change because someone has passed away or you change your mind about who you want to inherit a certain piece of property, then an amendment is a good choice.
6. When a restatement may be the better choice
While including amendments to an existing trust will often be the easiest way to modify your trust, amendments can get a little confusing. One way to avoid the potential confusion is to create a restatement of an existing trust, without revoking the trust entirely. A restatement allows you to include the required changes in the terms of the trust, while maintaining the original date of the trust. That means, the trust property that was already transferred to the trust will not need to be transferred again. With a restatement, the new trust can include a declaration that it is a restatement of the original trust. The trust terms should also indicate that the original terms remain unchanged, with the exception of a few specific terms that have been added.
Irrevocable trusts are quite different because their terms cannot be changed once the trust has been created and executed. Nevertheless, there are still some great benefits to using this particular type of trust. For example, assets that are included in an irrevocable trust are essentially protected from estate taxes, probate court and your creditors. So, while you must give up control of your property when you transfer it to an irrevocable trust, you gain favorable tax consequences and other protections.
Download our FREE estate planning worksheet! If you have questions regarding the revocable family trust, or any other estate planning matters, contact Gaughan & Connealy for a consultation either online or by calling us at (913) 262-2000.