Revocable Lifetime Trusts

Why you should have a Revocable Trust, or Living Trust.

Even if your assets are less than the Federal estate tax exemption, or less than the estate tax exemption for your state, you should consider a Revocable Trust for your assets.

When a Revocable Trust owns your assets, these assets totally avoid probate since they are not owned by you directly. You can be the Trustee of your Revocable Trust during your lifetime. The Trustee you appoint for the time of your death will distribute the assets of the Revocable Trust upon your death. The Revocable Trust property is distributed like it would be under a Will, but without the need for a Court Order.

Another benefit is that you retain lifetime control over your assets in a Revocable Trust. You retain the ability to add new assets to the Revocable Trust, or improve or sell assets in the Revocable Trust. Beneficiaries of your Revocable Trusts can be changed during your lifetime as well.

Are Revocable Trusts hard to do?

Revocable Trust require an extra step beyond a traditional will, but this can be well worth it. Besides carefully crafting your Revocable Trust, a Pour Over Will is drafted to ensure that any property you forget to add to the Revocable Trust can be distributed according to the trust document.

Once the Revocable Trust and Pour Over Will are complete, we help you with funding the Revocable Trust by transferring or retitling assets into the Revocable Trust so your Estate Planning is effective.

We also coach clients on the proper maintenance of a Revocable Trust once it is established, which includes adding new property and maintaining proper documentation for taxes.

At the end of a Trust, we assist with the transfer of trust property to beneficiaries without the need for Probate and a Court Order, which is usually not much more than a simple property transfer.

How does a Revocable Trust help married couples?

Revocable Trusts are a great planning opportunity for married couples. On other pages in this website for Gifting and Estate Taxes, there is more detail about married spouses being able to transfer unlimited amounts of property to each other without an estate tax.

Spousal transfers into a Revocable Trust can equalize the estates of both spouses for tax purposes. If one spouse has assets that exceed the Federal or State estate tax exemption, by equally sharing a Revocable Trust, it is possible to place both spouses under the Federal or State estate tax exemption to avoid future taxes.

Presently for married couples, this technique could exempt $10,900,000.00 in property from Federal Estate Tax, and $3,200,000.00 in property from Minnesota Estate Tax.

Tips for Revocable Trust.

Once constant problem I see when a new client brings an old Trust agreement to my office is that the Trust was never funded. This means the client has a Trust document, but there is no property titled in the name of the Trust. Unfortunately, in this situation, the Trust is only worth the paper is it written upon.

If the old Trust was not funded and it no longer reflects the client’s wishes, it is simple to start a new Trust and ensure that this Trust is property funded. If a Client still wants the old Trust, we weigh the ability to actually fund the old Trust against completing a new Trust document based current estate taxes and the desired distribution of assets.

You will need to keep records for the Revocable Trust to document income for tax purposes. Typically the client that places property into a Revocable Trust can use their own Social Security number for the Revocable Trust tax returns. If trust income is only provided to the client that starts the Revocable Trust, the tax return for the trust is very simple as income will only be reported on the client’s individual income tax return.