October 16, 2018
Revocable trusts provide a number of key advantages in a solid estate plan, beyond the capacity to avoid probate. Our estate planning attorneys consider some of the advantages of recoverable trusts below.
With a revocable trust, a trustee will likely have an easier time managing a client’s trust assets than through the use of a durable power of attorney alone. The trustee (often a child or children) can be appointed to act with you while you are alive. Thus, your chosen trustee can assist in bill payment and asset management when you are no longer able do so.
Give Yourself Peace of Mind
A properly crafted estate plan can give you peace of mind, knowing your assets and family are well protected. Our estate planning lawyers will help you get there.
Accessibility to Assets Following Death
Your trustee, successor trustee or co-trustee will be able to access assets of the trust almost immediately following the death of the trust creator or settlor without delay or at least a lot faster than a non-trustee. This allows for quickly and efficiently administering the trust assets to pay bills such as utility and funeral bills.
Flexibility for Future Changes
As estate planning lawyers, we work to plan for the unexpected. A revocable trust affords a reliable vehicle for making future changes in response to a change in circumstances.
Our clients commonly want to name children directly as beneficiaries on certain items such as life insurance, or as “payable on death” (POD) beneficiaries on bank accounts, or as “transfer on death” (TOD) beneficiaries on investment accounts. This generally sound approach has limitations.
Let’s consider where a named beneficiary dies before you, that share then reverts to the other named beneficiaries or to probate. For example, imagine a bank account that is POD to two children. Normally, if a child passes away, the POD account will then go solely to the surviving child. What if our client would rather have the predeceased child’s share distributed to that child’s children, rather than 100% going to the surviving child? A revocable trust could address what should happen to a predeceased beneficiary’s share.
Flexible Creditor Protection
Revocable trusts offer a number of ways to protect beneficiaries shares from creditors. At Wokwicz Law Offices, we normally add creditor protection clauses to revocable trusts, such as “spend thrift” clauses that allow a trustee to hold back a beneficiary’s share in the event that the beneficiary may lose his or her share of the trust to a creditor.
Where a child, grandchild, or other beneficiary is at risk of losing his or her share to a creditor, the trustee can hold back these funds to protect it from the creditor. The trustee can instead use that share for the beneficiary or the beneficiary’s family. For example, if an adult child is to receive assets from a trust, but the child has recently accrued health bills, is going through a divorce, has a failed or failing business, or recently caused a car accident, the trustee can hold back the child’s distributive share and protect it from these creditors.
Even while holding back these assets to protect them from creditors, the trustee can still use the child’s share to help the child by paying rent or for a mortgage, a car payment, or other expenses for the child. A trustee could even purchase a house or car, in trust, for the child’s use while still protecting it from creditors. The trustee could be authorized to pay education expenses or other expenses for the child’s children. In short, it is possible for a revocable trust to protect your beneficiaries shares from creditors while the funds are still used to benefit the child.
A trust can even be specifically drafted to hold back the share of a child with known or likely creditor problems. That share can be held in a separate specially created trust, providing additional protection or limited distribution options. In extreme cases, the trust could even by-pass the child, provide for the child’s children or spouse instead of the child.
Protection for Younger Beneficiaries
Revocable trusts typically contain provisions to hold back any younger beneficiary’s shares, or minor’s shares, in trust. Instead of simply handing a check to a younger beneficiary, the shares of a younger person or minor continue to be held in trust for the younger person or minor’s benefit.
The funds that are held back will typically be held in trust for the younger beneficiary until he or she reaches a certain age, such as the age of 25 or 30. Prior to reaching the specified age, the child’s share is typically available, but only upon the approval of the trustee. The requirement of trustee approval prior to distribution is also known as “at the discretion of the trustee.” The younger beneficiary’s share is typically available for distribution for the beneficiary’s health, education and support needs. Before the beneficiary reaches the specified age, the trustee can use the funds as you intended for the beneficiary’s expenses such as college, or buying a car to get to work or school or helping set up the beneficiary’s first apartment or moving expenses.
The trustee also has the discretion to not approve any distribution that you would not have wanted, such as the purchase of an expensive car. The trust can protect assets from being wasted foolishly on unnecessary items, or from a beneficiary who is lazy and wants to simply live off the inheritance.
Protection for Gambling, Alcohol or Drug Abuse
Where a beneficiary has a known challenge with addiction, a revocable trust can address those addictions directly.
Yet, these issues are not fully known in advance, so our estate planning lawyers normally include a safety clause in our client’s trusts to protect against a gambling, alcohol or drug addiction issue.
Where there is an addiction issue, the trustee can continue to protect trust assets and use those assets for the beneficiary’s legitimate expenses, to help the beneficiary recover, or to help the beneficiary’s family.
Trust protectors enable a trust the flexibility to be updated due to law or other changes after death or after the trust has been established. (We previously discussed trust protectors in more detail on our own website.)
Privacy and Protection from Problem Heirs-at-Law
A revocable trust can help keep assets, beneficiaries and other information private and not disclosed publicly. While an original Last Will and Testament has to be filed within 30 days of death (Wis. Stats 856.05), there is no such requirement for a trust. By keeping assets out of public, a trust can make it more difficult for someone who is “cut out” of your estate plan to challenge your choices.
We Can Help
Revocable trusts deliver robust, flexible estate planning tools – over and beyond simply avoiding probate. Only some of these additional advantages are discussed in this article.
Our decades of experience in creating and administering estate plans including wills and trusts, empower us to plan for known and unknown issues that might arise following the death of the trust creator or the creation of the trust. Let our experience guide you in the creation of a solid revocable trust plan. Call us to today on 262-658-2181 to set up an introductory appointment.