What is a Revocable Trust
Understanding Revocable Trusts in Estate PlanningA revocable trust, also known as a living trust, is a powerful and flexible tool in estate planning. It offers individuals and families the ability to maintain control over their assets while planning for the future. In this guide, we'll delve into what revocable trusts are and how they can be used effectively in your estate planning strategy.
Revocable Trust BasicsA revocable trust is a legal arrangement that allows you to place assets into the trust during your lifetime while maintaining the ability to make changes or even revoke the trust entirely. The flexibility of a revocable trust distinguishes it from irrevocable trusts, making it an attractive option for many individuals and couples.
Avoiding ProbateOne of the primary advantages of a revocable trust is that it helps you avoid probate. When you pass away, assets placed within the trust are designed to transfer seamlessly to your beneficiaries without the need for a lengthy and public probate process. This means your loved ones can gain access to your assets more quickly, ensuring that they are taken care of promptly.
In the case of real estate, a revocable trust grants the trustee immediate legal authority to manage the property, including selling it if that aligns with your wishes as specified in the trust. In contrast, if the property were to go through probate, it could take months before anyone could exercise such authority. Another advantage of avoiding probate is that distributions through a trust remain private. While probate proceedings are part of the public record, trust distributions are private, safeguarding your decisions about your legacy. Managing Minor Children's InheritanceIf you have minor children or grandchildren set to inherit from you, a revocable trust can simplify the process of overseeing their inheritance. Without a trust, establishing mechanisms to manage assets for your heirs during the probate process can be cumbersome.
With a revocable trust, you can specify the trustee and provide detailed instructions about how assets should be managed. For instance, if funding education is a priority, you can ensure that the trustee prioritizes preserving funds for their college education. Moreover, as your children or grandchildren grow, you have the flexibility to amend or revoke the trust to adapt to changing circumstances. Managing Transitions for Family PropertyMany families have unique assets like vacation homes or family farms, which can become points of contention when ownership transitions from one generation to the next. A revocable trust can provide clarity and guidelines to minimize family conflicts and protect the values associated with the property.
Parents who are primary owners of family assets can use a revocable trust to appoint one or more trustees and outline how decisions should be made regarding the property. You can either deed the property directly into the trust upon its creation or specify that it will transfer to the trust upon your passing. Minimizing Estate Taxes (Sometimes)While property transferred to a revocable trust is still considered part of your taxable estate, there's a potential strategy to minimize estate taxes, especially for married couples. By creating specific trust structures, such as AB trusts or family trusts, couples can essentially pool their individual estate tax exemptions.
For example, in Massachusetts, the estate tax threshold for an individual is $2 million. This means if your taxable estate exceeds $2 million, your estate will owe estate taxes. By utilizing an AB trust, a married couple can collectively have a $4 million threshold, reducing the potential estate tax liability. While certain estate tax planning strategies may require irrevocable trusts, a revocable trust is an option that all married couples should consider, providing essential flexibility and control. |
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Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna wrote a book on estate planning: The Road to Peace of Mind: What You Need to Know About Estate Planning. Jenna has helped many individuals and families with planning to protect their legacies and loved ones, and planning for the future and succession of their businesses.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and earned her LLM in estate planning from Western New England Scool of Law in 2016. She has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped many clients with planning for their legacies and their future, and navigating the probate process in Massachusetts after the death of a loved one.
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The role of a revocable trust in your estate plan depends on your unique circumstances and objectives. If you're interested in exploring the benefits of revocable trusts or need guidance on your estate planning journey, our experienced attorneys are here to assist you. Contact us today to learn more about how revocable trusts can be tailored to your specific needs and goals. You can start by using the button below to schedule a free information call, or simply give us a call at 781-784-2322.
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