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What is a Revocable Trust?


A trust is a legal structure for the ownership of property, where the creator appoints a trustee to manage the property and creates a set of instructions for the trustee to follow in the management of the assets. There are many different kinds of trusts, which can be used for many different purposes. For example, a parent may leave an inheritance for a child, under the management of an uncle, with instructions to use the funds primarily for education.

A Revocable Trust is a kind of trust that you can use to provide instructions for the disposition of your assets after your death. In this way, it's very much like a will, and it can substantially substitute for a will.

The difference is that at the time of a death, a will has never been activated and an executor has never taken charge of the assets. As such, a court has to review the will and appoint the executor -- that's the probate process.

No probate process is needed for a Revocable Trust, because it's active and operational from the time that you sign it. It keeps on running after you're gone. And the person you've appointed as a successor trustee can get to work right away -- doing the same things an executor could only start doing after a lengthy probate proceeding.

Meanwhile, during your whole healthy lifetime, you are the trustee. That means that you are fully in control of your assets at all times.

During your life, you will hardly know that you have a Revocable Trust -- it will have no tax consequences, and will require no administrative efforts. But it will be there as a safety net, allowing your successor trustee to step in seamlessly and manage your assets if you are ever ill or incapacitated.

The result of all this is that a Revocable Trust is a substitute for a Will. It speeds and streamlines the settlement of your estate by eliminating probate proceedings. And it also supplements your Power of Attorney, by allowing a successor trustee to handle things for you during your life time in the event of incapacity. These are great benefits, circumventing significant costs, delays and bureaucracy, and guaranteeing the smooth and reliable management of your affairs, during your lifetime, and after.


Should I have a Revocable Trust?


Anyone can benefit from having a Revocable Trust. It's a bit like having a dishwasher or flying business class -- you can live without it, but it's a very desirable luxury.

In the post-Covid world, however, the probate courts in New York City have become hopelessly backlogged. Probate proceedings that used to take a month or so are now taking most of a year, or more. As such, a Revocable Trust is moving from being a luxury to being more of a necessity.

Revocable Trusts are particularly important for people whose probate proceedings would be unusually complicated. These include:

-- People who own property in multiple states. A separate probate proceeding is required in each state where you own real estate (sometimes it's required for financial accounts, too).. A Revocable Trust can enable you to avoid probate proceedings in any state.

-- People who wish to maintain confidentiality. Probate proceedings are on the public record, so if you have enough of a public profile that someone may snoop in the court files for your information, you may wish to use a Revocable Trust in order to keep your estate out of the court.

-- People with family issues -- if you're in conflict with your closest relatives, or estranged from them, or don't know who or where they are, then your probate proceeding would be extremely difficult. Family friction can give rise to the lengthy, expensive and emotionally draining litigation of will contests. And even if you have no contact with your next of kin, or don't know who they are, they are still necessary parties to the probate proceeding, and it may require a lot of time and expense to locate them.


When does a Revocable Trust become effective?


The main idea of a Revocable Trust is to handle the distribution of your assets after your death. But it becomes legally effective as soon as you sign it.

This is useful, because it can also enable someone (your successor trustee) to manage your assets while you're living -- e.g., if you are ill or incapacitated, or get dementia when you're older.

That's when your trust becomes effective. But you also need to ask for what purposes is it effective.

It's very important to appreciate that your Revocable Trust will only ever be effective for the management of those assets that are placed into the ownership of the trust, or have the trust named as a beneficiary.

While your Will enables an executor to handle absolutely any matter relating to your legal existence, your Revocable Trust enables your trustee to handle only those assets that are in the trust.

For this reason it's very important to put your assets into your Revocable Trust promptly after you sign it.

Once you sign the Revocable Trust, it's a legal structure you can use for any asset that you own at the time, or later. You can put assets into it, or take them out, whenever you like. But to ensure its intended effectiveness, you should start by placing your assets into the Revocable Trust promptly after signing.




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