Estate planning is a difficult activity, but it’s a necessary one. Many people, however, that estate planning is only necessary for the richest of the rich. In reality, most people can benefit from some form of estate planning.
There are a number of different options when a person begins to consider how to create a successful estate plan. One of these options is a revocable trust, which can be used as a substitute for a will. Instead of having your assets proceed through probate after your death, assets are passed through a private entity referred to as a trust.
The trust is classified as revocable because it can be changed at any time. Revocable trusts exist in contrast to irrevocable trusts, which are capable of being used to “shelter” assets from an estate.
Reasons why Revocable Trusts Can Be Helpful
There are some particular advantages in creating a revocable trust, which include:
- Probate court not necessary. One of the primary advantages of revocable trusts is that these trusts need not pass through probate, which is the formal court proceeding where a deceased person’s assets and debts are managed. Probate in New York is particularly time intensive as well as expensive, which are two of the most common reasons why you might want to avoid this process. Instead, assets that are placed in a revocable trust are distributed according to a person’s wishes.
- Incapacity issues. Another reason why revocable trusts often fit into a person’s estate plans is that the terms of the trusts will often dictate how management of the trust should be handled following your incapacity. This is an attractive option in lieu of formal conservatorship hearings, which much like probate can be expensive and time consuming.
The Drawbacks to Creating a Revocable Trust
Even though there are some reasons why a person might benefit from a revocable trust, there are also some shortcomings. Some of these limitations include:
- No tax advantages. Revocable trusts do not provide any tax advantages. Additionally, not all types of assets that a person owns qualify for placement in a revocable trust. For example, individual retirement accounts cannot be placed in a revocable trust.
- Retitling. A person must retitle all of their assets that are held in a revocable trust. This can be a time intensive activity, but is necessary to utilize the advantages a trust can offer.
- Heirs have more time to contest a trust. If a heir wants to contest the terms of a will, there are specific regulations in New York and many other states about how these disputes must be handled. The time period to contest the terms of a trust are often longer than they are for other types of estate planning document. As a result, if your will contains any ambiguities or other perceived challenges, your heirs could be fighting over its meaning for some time.
Speak with an Experienced Estate Planning Lawyer
It can be challenging to decide if revocable trusts are playing a capable role in your estate plan. If you need assistance deciding which estate planning options will work best for you, it can help to speak with an experienced estate planning attorney. Contact Ettinger Estate Planning today to schedule a free initial consultation.