What Is A Revocable Trust?

  • A Revocable Trust takes the place of a Last Will and Testament in distributing your assets at your death, and if properly funded, avoids having your assets pass through probate.
  • A Revocable Trust can facilitate the administration of your assets during your lifetime if you become incapacitated by having your Successor Trustee manage your assets and pay your bills on your behalf during your incapacity.
  • The Grantor is the person who establishes a Revocable Trust; the Trustee is the person who manages a Revocable Trust; and the Beneficiary is the person who receives income and principal from the assets held in the Trust.
  • Initially, the individual who establishes a Revocable Trust acts as the Grantor, Trustee and Beneficiary of the Trust, and accordingly, has complete control over all of the assets held in the Revocable Trust.
  • The tax identification number of the Revocable Trust is typically the Grantor’s social security number, which means that the Grantor will continue to pay his or her income taxes in the same manner as if he or she did not have a Revocable Trust. In general, there are no transfer tax consequences for you to transfer assets to your own Revocable Trust or to your spouse’s Revocable Trust (if your spouse is a U.S. citizen).
  • The Trustee, who is the person who administers and distributes the assets of a Revocable Trust, does not file the Trust with the probate court, and therefore, unlike a Will, a Revocable Trust can remain confidential.
  • As the Grantor of a Revocable Trust, you can establish continuing trusts that will take effect upon your death for your children and grandchildren that will also avoid probate.
  • A Revocable Trust permits the Grantor to change the terms of the Trust at any time during the Grantor’s lifetime, whereas an Irrevocable Trust does not permit the Grantor to make any changes to the Trust once it is established. Unlike a Revocable Trust, which uses the Grantor’s social security number as the tax identification number, an Irrevocable Trust has its own separate tax identification number and typically transfers made to an irrevocable trust have transfer tax consequences for the transferor.
  • If you are married and the combined value of both spouses’ assets exceeds the current applicable exclusion amount you can establish a Revocable Trust with a bypass trust to utilize both spouses’ estate tax exclusions to reduce or eliminate estate taxes. Under the 2017 Tax Act, the federal exclusion amount is $10 million and is adjusted each year for inflation, however, if congress does not extend the current legislation before January 1, 2026, the federal exclusion amount will revert to $5 million, as indexed for inflation.
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