Chances are you’ve heard of a revocable trust but didn’t see it as essential if you already have a will and a financial power of attorney. However, a trust is potentially more powerful than either of the other documents, making it well worth discussing with your estate planning counsel and as part of your estate plan.
What is a revocable trust?
A revocable trust can provide for management of your financial assets during your life, if you become incapacitated or experience a period of disability, and after your death. In that way, it combines elements of a will and a power of attorney, but adds an additional dimension. Key characteristics include:
- In establishing a revocable trust, you transfer ownership of specific assets to the trust and appoint a trustee to manage those assets based upon your needs and according to your direction.
- Nearly any type of asset can be placed in the trust, with investable or investment assets the most common option.
- Generally, the trustee may be your spouse, a family member, another person or a corporate fiduciary, and you may be a sole trustee or a co-trustee.
- You can generally revoke or amend this type of trust at any time.
- On your death, property in the trust can be distributed to the remaining beneficiaries or may continue to be held in trust and managed for their benefit.
What are the advantages of a revocable trust?
- It may be an attractive option for you to address the issue of disability or diminished capacity. With a trust, unlike some powers of attorney, the trustee continues to manage the trust’s assets during your period of disability or incapacity. In addition, since most financial institutions have fiduciary capabilities, they are often more comfortable working with trust directives than powers of attorney.
- A revocable trust may provide for the management of financial assets across multiple generations, since the directives you establish initially can pass from your direct heirs to their heirs and so on, subject to certain limitations.
- A revocable trust may help streamline the process for passing assets on to heirs by allowing certain of your assets to avoid probate. In addition, the executor’s work of identifying all of your assets may be abbreviated, since many assets are already collected in the trust and you may be able to direct your remaining assets to the trust through a pour-over will (please consults your estate planning counsel for advice on your particular circumstances).
- Since the trust may allow certain of your assets to avoid probate, you may avoid your estate being a matter of public record, giving you and your family a level of privacy that may not be available with a will. You may also be able to avoid a period where the assets are unavailable to be managed.
When could a revocable trust be useful?
While there are many potential benefits to using a revocable trust, there are certain situations where it can be particularly useful after your death. Here are three examples.
- Hold assets for minors. Assets can be distributed fully at a specific age or disbursed periodically at multiple ages.
- Protect and manage funds for a family member who isn’t able to responsibly manage the money — for instance, an adult child with a drug problem, a spouse with poor money management skills or an heir with a mental disability.
- Keep assets in the family. For instance, if you’re concerned about an adult child losing family assets in a divorce, the trust may be able to help securely hold those assets.
If you’re interested in learning more about how Hancock Whitney can assist with revocable trusts, your Private Banker can answer your questions, discuss how a trust might apply to your estate and financial plans, and review with you any existing trusts to ensure they still meet your needs.
Rules relating to trusts and estates vary significantly among localities. In addition to discussing the potential role of trusts with your Private Banker, you should consult with your estate counsel on the benefits and limitations of revocable trusts for you and your heirs.
The information, views, opinions, and positions expressed by the author(s), presenter(s) and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.
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