A revocable trust is a trust created while you are living.
You retain the power to revoke and amend the trust and reacquire its assets. It is a comprehensive estate planning tool often used to avoid probate and to provide an asset management vehicle during any period of your incapacity.
There is no change in your income tax treatment of assets placed in a revocable trust. While you are living, all of the income, deductions and credits flow through to your personal income tax return and no separate tax return must be filed for a revocable trust.
You would be the trustee of your revocable trust as long as you are able and willing to serve in that capacity.
Thus, you would manage your assets just like you do now, except that you would hold title to them in your name as trustee.
A very important undertaking with a revocable trust is transferring ownership of your assets to the revocable trust. You would designate a successor trustee(s) to take over for you in the event of your death, incapacity, or resignation.
The revocable trust would contain provisions for distributing your assets to your beneficiaries in the event of your death just like a last will and testament.
Standard benefits of having a revocable trust include: (1) avoiding probate, including avoiding probate in other states where your assets are located; (2) avoiding public filings of documents, inventories and accountings; (3) management of your assets in the event you become incapacitated; and (4) a seamless transition of management of assets without court involvement upon your death or incapacity.
An additional benefit for married couples is that they can create one revocable trust to hold all of their assets and such trust becomes irrevocable upon the first death so that the surviving spouse cannot alter such agreed to plan.
This is often important in second marriages or in the event the surviving spouse remarries.
K. Coleman Westbrook, Jr. is a Partner in the Friday, Eldredge & Clark, LLP law firm in Little Rock. To submit a question, please contact Janet Borders at [email protected].