Is a Revocable Trust Right for Me?

Next to a Testamentary Trust created for the protection of minor’s assets, the most commonly requested trust is a revocable trust. A revocable trust can be a great tool if you need a little more control over assets, have property in different states, or have some more complex estate planning considerations. However, there are some drawbacks to a revocable trust as well.

Pros-

Avoid probate

While the probate process in Pennsylvania is not particularly grueling or drawn out, there are still some benefits to avoiding it. It reduces the amount of information that will be made public through the probate records, which are public documents. Most of the time the general public pays very little attention to probate records, but they are still accessible to anyone who asks. Avoiding the probate process can offer some protection from creditors of your estate and can make assets available to beneficiaries faster.

May avoid guardianship

Should you ever become incapacitated, having your assets already in a trust makes them much easier to access and can avoid the need for a hearing before a Judge. A good Financial Power of Attorney and Health Care Power of Attorney can also help avoid a guardianship. However, a revocable trust provides more protection and better mechanisms for selecting successor trustees than Financial Power of Attorney and Health Care Power of Attorney, which can both be less flexible.

Flexibility

By making the trust revocable during your life time you allow yourself maximum flexibility to make changes as your needs change, much like a Will, while also enjoying the other benefits of a revocable trust.

Cons–

Higher upfront costs

Setting up a trust does cost more than a basic Will.

Funding can be tedious

The trust is only worth what you have actually transferred to it. You can have the best trust document, but if you fail to properly fund it, it is worthless. Assets will need to be transferred at the time you execute the trust document and beneficiary designations may need to be changed depending on the nature of the asset.

You still need a Will

Unfortunately, you will still need to have a Will. However, it will be a basic Pour Over Will that dumps anything that might have been missed into the trust. So anything you forgot to transfer to the trust that is a probate asset, will find its way to the trust. However, you do not want to rely on this pour over for anything with a beneficiary designation. If the designation is to a person or entity, the Will does not override the designation and the asset will not be captured by the trust.

No asset protection for Medicaid

If you are looking to protect your assets for Medicaid purposes, this type of trust will not achieve that goal. Since you have essentially total control over the asset during your lifetime, the asset is still considered an available resource for qualifying for Medicaid.

Higher upfront costs

Setting up a trust does cost more than a basic Will. Speak to a trusted estate planning attorney to determine if the additional cost a trust is the right solution for your circumstances.

Lindsay Schoeneberger is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Estate Planning and Estate Administration.