How is a Revocable Trust like a Ziploc Bag?
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How Does a Revocable Trust Work?
Also known as a “Living Trust,” a Revocable Trust is a written document determining how your assets will be distributed to beneficiaries (the recipients of assets) at your death. Like a Ziploc bag, the trust is a storage place where items can be removed or added. Because it is “Living” you create this plan during your lifetime and can change and adapt it as time goes on. As long as you are living, you can adjust the provisions in the document. A Revocable Trust is a place to store assets like:
Bank Accounts
Real Estate
Life Insurance
Retirement Accounts
Vehicles
Patents
Valuable Collections, and so on.
Why would this be preferable to a Standard Will?
It is a bit like “skipping the middle man,” which is, in this case, the Court System. When you die with only a Will, the Executor must visit the courthouse, notify all interested parties, go through an intensive round of paperwork, and perhaps pay considerable fees to manage and distribute your properties. This court process called Probate can be enormously time-consuming and costly. For people with assets in multiple states, this legal process will have to occur in various courts with varying fees and policies - a colossal headache! With a Trust in place, the Executor takes over the distribution proceedings without a court-driven process.
Another critical reason to consider a Revocable Trust is to put in place your wishes for care and quality of life if you are physically or mentally incapacitated. The Trust and its assets can continue to be managed by a Trustee during your lifetime—a trustee whom you have chosen. Without a plan in place, there can be difficult situations where a family member might have to visit probate court and demonstrate how incapacitated you are, perhaps leading to a court-appointed guardianship. These traumatic experiences are primarily avoidable with good estate planning. With a trust, you can leave assets to care for your dog Otto, ask to remain in your own home, request that your sister be flown out to see you once a year - you can have your say!
If a Revocable Trust sounds interesting to you, you will want to start by inventorying your assets.
Some of these assets will require:
contacting banks, insurance companies, and transfer agents to update beneficiaries
issuing new investment certificates
retitling cars, and signing new deeds
You will also want to consider who you would want to receive those assets and whom you would trust to manage the distribution as a Trustee.
Most importantly, you will need to find a trusted attorney who can help you understand your options and establish an estate plan that realizes your wishes.