Travis Russell

Travis Russell, CFP®

Travis employs many of the disciplines of success that he learned as a Division 1 hockey player – namely, persistence, practice, and a having passion for what you do – to his role as Principal and Client Advisor.

A revocable trust is considered a more effective estate planning tool than just a Last Will and Testament for several reasons. A revocable trust gives the grantor an orderly way to distribute their assets upon their death and privacy for themselves and their heirs during the process. We’ll explain what it is and why you should consider putting one in place.

What is a Revocable Trust?

A revocable trust is a trust created during an individual’s life that can be changed or terminated at any time. The individual that creates the trust is called the grantor, the trustor, or the settlor. In most cases, the grantor is also the trustee of the trust as well as the primary beneficiary of the trust during their lifetime.

What does it do?

  1. Ensures privacy: The main purpose for a revocable trust is to avoid probate, the legal process of distributing assets of a decedent at death. Why? Because the probate process which includes taking an inventory of assets, notifying and paying creditors, etc., is made available to the public. By avoiding probate, the privacy of the grantor and their beneficiaries is protected.
  2. Adheres to the wishes of the grantor: Similar to a will, a revocable trust will provide a thoughtful distribution of their assets to their heirs. The trust document can be amended an unlimited number of times, so the distribution of assets can be changed as the grantor ages or additional assets are acquired. At the death of the grantor, a trustee named in the trust document will work with the executor of the estate to follow the guidelines of the trust document.
  3. Creditor protection for beneficiaries: While revocable trusts do not provide creditor protection for the grantor, they do for the beneficiaries of the trust, but only if the assets remain in the trust upon the passing of the grantor.
  4. May reduce state estate taxes: For families living in a state with an additional estate tax, a well-written revocable trust may provide significant value by reducing state estate taxes.

What doesn’t it do?

  1. No tax benefits: There are many misconceptions about revocable trusts, the biggest being the purpose and benefit of a revocable trust for estate tax purposes. It does not have any benefit for estate tax purposes or even taxes during a grantor’s lifetime. In the eyes of the government, assets held within a revocable trust are the same as if they were held in the individual’s name.
  2. Fund itself: A revocable trust does not fund itself by merely creating the trust documents. To take advantage of the benefits listed above, account registration must be changed on each account owned by the grantor.
    Many estate attorneys recommend a “pour over” will. Upon the grantor’s death, it will collect and transfer all additional assets (jewelry, cars, etc) into the revocable trust so that no assets go through probate.
  3. Eliminate the federal lifetime gifting and estate tax exemption: Moving assets into a revocable trust is not considered a gift and does not affect an individual’s federal lifetime gift or estate tax exemption, currently at $11,180,000 per person in 2018.

Should I have a revocable trust?

If you’re concerned about your assets going through probate or the need for privacy, for you or your beneficiaries, we recommend that clients discuss a revocable trust with their estate planning attorney.

Additional reasons one might consider a revocable trust include:

  1. If you have assets in more than one state: Without a revocable trust, assets, including real estate, that are held in more than one state would be subject to a separate probate process for each state.
  2. If you have a complex collection of investments: including real estate, artwork, and other assets that would be difficult for beneficiaries to distribute.
  3. Planning for future health concerns: Assets held in the name of a Revocable Living Trust at the time a person becomes mentally incapacitated can be managed by their Disability Trustee instead of a court-supervised guardian or conservator.

We recommend that any investor with significant assets or assets in more than one state contact their estate planning attorney to review the benefits of this important estate planning tool.

Your GWS Advisor will work with your estate planning attorney to determine if a revocable trust is right for you.

Learn more about revocable trust, contact us today!

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