When is a revocable trust right for you?

April 06, 2013 (Press-News.org) When is a revocable trust right for you?

Article provided by Cohen Law Services, LLC
Visit us at http://www.cohenlawservices.com

Trusts are an estate planning tool that can provide increased financial security, greater privacy protection and tax benefits. Mike Janko, a director with the National Association of Financial and Estate Planning (NAFEP) recently discussed the many benefits of a trust with CNN Money. In that conversation, he noted that the benefits of a trust are available for those with a net worth beginning at $100,000 and up.

The estate planning expert specifically recommended trusts for those who find themselves in the following situations:
-A large portion of finances invested in real estate
-A desire to include stipulations on how the money is distributed
-A desire to maximize estate tax savings, or
-A need to provide for a disabled relative

In these instances, a trust can be a beneficial addition to an estate plan.

Trust basics

Trusts are created when one person gives property or assets to another. The person who receives these assets is called the trustee. The trustee then holds and manages the assets for those who benefit from the trust, called the beneficiaries.

If a trust is not used, a person's assets will likely go through probate. Probate is a court process used to determine how the assets are distributed after a person's death. The process can be both expensive and lengthy. Avoiding probate can save time and money. In addition, since probate proceedings are entered into public record, those who avoid probate also have increased privacy.

There are various types of trusts that can meet these goals, one of which is the revocable trust.

Revocable trusts

A revocable trust, also known as a living trust, is created during the creator's lifetime and allows the creator the ability to make changes at anytime. As a result, those who use this type of trust retain control over the assets.

The primary benefit of this type of trust is the ability to avoid probate. Generally, there are no income or estate tax benefits associated with this type of trust. A revocable trust also provides very little asset protection, since creditors can still reach the assets.

The revocable trust is only one type of trust that can be used within an estate plan. Additional types include irrevocable, asset protection, charitable, spendthrift and special needs trusts.

Determining if a trust is the right tool for your estate plan is a difficult decision. If you are developing an estate plan or reviewing a pre-existing plan, it is wise to contact an experienced estate planning attorney to help make sure your estate plan achieves your goals.