Why You Might Need A Revocable Trust : Action Financial Strategies LLC | New Holstein & Green Bay, WI

Why You Might Need A Revocable Trust

A revocable trust is a legal document that allows you to manage your assets during your lifetime, and it can help ensure that those assets go where you want them after your death. When you create a revocable trust, it’s important to understand what the document does and why it’s beneficial for people in certain circumstances. Let’s look at some potential reasons why you might want to set up one.

A trust may help you control your assets even after you die. When an estate has a revocable living trust, it can be changed at any time and the beneficiary can be changed or replaced. The successor trustee named in a revocable living trust can be changed or replaced as well.

In this way, even if you become incapacitated or for some reason become unable to manage financial matters for yourself, the successor trustee will be able to manage those matters for your benefit until such time as another person is appointed by the court to make decisions on your behalf.

A revocable trust is a private document, and therefore not filed with the probate court. It also isn’t available to the public. Because of this, trusts preserve your privacy and keep your personal information safe from prying eyes.

A revocable trust can help you protect your assets, avoid probate and avoid the possibility of your family fighting in court.

Revocable trusts allow you to choose who will manage your assets after death, before incapacity or upon incapacity. Trustees are legally allowed to take over management of assets so that they can pay bills and taxes on behalf of the disabled person, without having to go through probate court. A trustee is someone who manages an estate for someone else’s benefit (the beneficiary) rather than his own interest; he acts as a representative of another person. In contrast, an executor is someone who administers a deceased person’s estate according to state law after death but does not have any control over those assets prior to death or during incapacity (although some states do allow executors additional powers).

If you want someone else (instead of probate court) to manage your financial affairs if something happens to you and/or your family members are feuding with one another over money matters, then the use of a trust can help make this an easier affair.

Probably the biggest reason I see clients owning a revocable trust, is that by either placing assets in trust by transferring ownership and retitling, or simply by pointing to the trust through beneficiary designations, one can control the flow of these assets at death. Rather than the assets simply go directly to beneficiaries, with no stipulations, there is a lot of flexibility in distributing assets through a trust. With proper trust language in place, assets can remain in additional trusts for the heirs as a further means of protecting these assets from would be creditors or divorcing spouses of the heirs after your death.

One of the biggest false reasons I see people setting up a revocable trust is that it somehow protects the grantor, that is, the person or persons who are making gifts or transfers to the trust, is that a revocable trust will protect the assets from their creditors. While alive, the trust offers no protection because you still own and control the trust. This includes no protection from counting these assets along with all non-trust owned assets in the application for state health care aid.

When someone needs assisted living care or full nursing home care, some people might also try and apply for state Medicaid coverage. This type of assistance is only offered to people that meet stringent asset requirements, meaning they have to have spent nearly all their assets to qualify for state aid. Unfortunately any assets in a revocable trust are counted in this figure and would have to spent down for care before any state assistance would be available. This is why using a revocable trust to avoid “nursing home costs” isn’t a valid option.

To conclude, a revocable trust offers flexibility and a range of benefits. You can be the trustee, and you have complete control over your assets and additionally it allows you the freedom to change beneficiaries, trustee(s), or other details without having to go through probate court. Just be careful in knowing what it can and cannot do in terms of protection of your assets or in relation to other goals you might have for your finances.

headshot of Bradley

Bradley Ruh Owner, Financial Adviser

This material is for general informational purposes only and was produced by Action Financial Strategies, LLC.