Have you been told that you don't need a revocable trust because you don't own 2 million dollars worth of assets? This may be true if all you care about is estate taxes. However, the main reason for setting up a revocable trust is to avoid probate and the cost and inconvenience associated with it.
While a trust can minimize or eliminate estate taxes for persons with a net worth of over 2 million dollars, the benefits of avoiding probate are available to almost anyone. And there are plenty of benefits to avoiding probate.
Probate is expensive. In Florida, the law requires that the personal representative (or executor in other states) hire an attorney to help administer the probate estate. This same law suggests that a reasonable fee for that attorney is three percent of the total gross value of the property passing through probate. Add to that another three percent for the personal representative's fee and you can begin to see how expensive probate can be.
If you own a $400,000 home and have $200,000 in investments, the six percent of fees can total $36,000. That's money that your loved ones and heirs will not receive.
Compare this with the trust, where the trustee (person administering the trust) is usually a family member and does not charge a fee. The trustee is generally capable of administering most of the estate without help, and only hires an attorney for specific tasks. As a result, the legal fees are usually in the hundreds of dollars as opposed to the tens of thousands of dollars paid in probate.
Probate is also time consuming. The minimum time to administer an estate in Florida is five months and it is not unusual for a probate administration to last more than a year. On the other hand, many trusts, even those with large estates, have been administered in a matter of weeks.
Setting up and managing a revocable trust is a simple matter. A trust is a legal arrangement under which the property of one person (the grantor) is held by a second person (the trustee) for the benefit of a third person (the beneficiary). A revocable trust can be amended or revoked by the grantor.
In establishing the revocable living trust, you would be the grantor, or creator, of the trust. As grantor, you determine how your property is managed and invested, who the beneficiaries are, and what happens to your property after your death. You also have the right to change the trust at any time during your lifetime or revoke it in its entirety. After your death, no one else can amend the trust and your wishes must be carried out.
The trustee is the legal owner of the property in the trust. The trustee has the authority to manage, invest, acquire and dispose of the property. During your lifetime, you would also be the trustee.
Because you are both the grantor, with full authority to change the terms of the trust, and the trustee, with full authority to manage the trust property, you will have absolute control over all of the property in the trust. You will notice very little difference in managing your property after setting up the trust from when you owned it outright.
If you should become incapacitated, the successor trustee you named in the trust will be able to immediately manage the trust assets and provide for your needs without the need of a court-appointed guardian. Upon your death, the successor trustee will have authority to distribute the trust property to the ultimate beneficiaries in the manner that you have provided for in the trust. Your successor trustee can be your spouse, one or more of your children, a close friend or a corporate trust company.
The third category of person in the trust is the beneficiary. During your lifetime, you are the beneficiary of your revocable trust. All income earned by investments in the trust will be attributed to you for income tax purposes. Your tax return will not change as a result of the trust.
Upon your death, the trust property will be distributed by the successor trustee to the beneficiaries named in the trust. These distributions are made without a probate administration.
Trusts are not just for the wealthy. Avoiding probate is a benefit almost anyone can enjoy. You should consider making a trust part of your estate planning.
Author Resource:-
Dean Hanewinckel is an estate planning attorney practicing in Englewood, Florida. For further information you may contact him at dean@dean-law.com. Visit his website at http://dean-law.com to receive a free report - "5 Do-It-Yourself Ways to Avoid Probate."
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