The Wealth Counselor
Revocable Trusts Can Be The Solution to Your Client's Needs
A revocable trust-centered estate plan offers many benefits that a last will and testament cannot offer. Trust-centered plans are better for clients with long-term vision. Understanding the benefits of trust-centered planning will position you as the trusted advisor who can spot the issues and implement solutions.
How Your Practice Can Benefit When Your Clients Use Revocable Trusts
Assets Under Management:
Three Investment Management Advantages of Revocable Trusts
#1 – Revocable Trusts Help You Faithfully Implement Your Investment and Distribution Strategies. Custodians can freeze accounts owned individually by a decedent, which can complicate your asset management process. Revocable trusts with co-trustees or successor trustees have more asset management flexibility.
#2 – Revocable Trusts Simplify Management of Illiquid Alternative Assets. This is especially true of real estate, private equity, and private debt. Normally it is much simpler to alert an issuer/sponsor about a change in the acting trustee(s) than to retitle such assets, especially since many sponsors fail to offer Transfer on Death provisions. And, if these investments are spread across multiple states, a revocable trust also avoids opening probate in each jurisdiction.
#3 – Revocable Trusts Reduce Paralysis or Rash Changes During Times of Grief. Grieving surviving spouses often either suffer decision-making paralysis or opt for wholesale investment strategy changes. By holding assets in trusts, you lighten such clients’ decision-making load during a stressful time, and help them avoid rash changes instigated by new account and transfer paperwork. Depending on the mix of assets and the current market price, premature liquidation may produce a disappointing outcome.
Four Things a Trust Can Do That a Will Cannot
Wills and trusts are similar, but the opportunities that a trust provides make it the superior planning tool for many.
#1 - Act as a Disability Plan. A revocable trust provides protection during three phases: what happens while the trustmaker is alive and well, what happens if the trustmaker is alive but not so well, and what happens after the trustmaker dies. It’s during the second phase that the trust really outshines a will – if the trustmaker becomes incapacitated, the disability trustee can step in and take care of things immediately and without court intervention. This keeps the trust property under control of a trusted family member or friend instead of a guardianship judge.
#2 - Keep Assets Outside of Probate. Probate can be a time-consuming and costly court-supervised public process. A will-focused estate plan lands heirs squarely in probate court. A trust-focused estate plan allows the settlement trustee to step in and carry out the trust maker’s final wishes without any court involvement or oversight.
#3 - Keep a Minor’s Inheritance Outside of Guardianship. A minor who is named as the beneficiary of a life insurance policy, IRA, or payable-on-death account will require a court-appointed guardian to manage the property until 18. On the other hand, a trust for the minor can be created in a revocable trust and named as the beneficiary of the policy or account. This allows the client to decide how long the trust will continue – age 25 or 30, or even the beneficiary’s lifetime – not just until 18.
#4 - Keep Final Wishes Private. A will filed for probate becomes a public court record, which means anyone can go down to the local probate court and read wills and other probate documents. On the other hand, a revocable trust is a private document that remains confidential during life and after death.
If you have a trust you would like us to review or any estate planning questions, please give us a call.
Sound Estate Planning, PLLC • 152 3rd Ave. South, Ste. 107 • Edmonds, WA 98020 • (425) 967-7287