A revocable trust is a legal instrument that is made at the behest of a person called the grantor, for the benefit of another person or persons called beneficiaries. The object of this legal instrument in is to put the property subject of the trust in the hands of the grantor, usually for administration, for delivery of the property or the fruits thereof to the beneficiaries after the grantor’s death. A revocable trust, as opposed to an irrevocable trust can be altered or repudiated by the trustor anytime during his lifetime. A revocable trust is a great way to take care of one’s family or the payment of one’s debts to creditors after death, and hence it is useful to know how to make a revocable trust. Here’s how:
- Learn about the advantages and disadvantages. In a revocable trust arrangement, for instance, the grantor during his lifetime remains the manager of the property subject of the trust, and the beneficiaries (usually the heirs of the grantor) will only get the property after his death, thus saving the beneficiaries from the cost of financial management. However, heir-beneficiaries are not saved from paying estate or inheritance taxes under this scheme.
- Get professional advice from an attorney. No matter how much legal research you may have exerted on your own, nothing beats getting professional help to discuss this choice with you. Your lawyer’s insight in your financial situation will help you prepare the revocable trust to your greatest advantage. Since this trust will govern the disposition of your property after death assuming it will not be revoked, it is best to consult a lawyer. He is in the best position to advice you on what terms would help you achieve your financial goals. Make sure however, that the lawyer you consult is licensed to practice law in your state.
- Draft the revocable trust in the proper form. It is always best to do this with the help and advice of your lawyer. Ask him to draft it for you. If you are doing it on your own, there are plenty of websites that offer revocable trust forms (try looking up the terms "Declaration of Revocable Trust" or “revocable trust forms”) for free or for a fee. A word of caution in using downloaded forms: have your final draft checked by your lawyer. Do not rely solely on what you find online even if you’ve researched well. The forms followed in the different states may be different. You can also make the mistake of using an outdated form or a form for another state. You can also be using a correct form but one which does not contain all the necessary stipulations. Draw up the revocable trust forms. The basic forms are fairly standard and can even be downloaded from some websites.
- Transfer the subject funds to the trust. This seems like the last logical step right? But in practice, this could be a long and even difficult process requiring a formal transfer and a consideration of the tax implications for the transfer of such assets or accounts.
So there you have it, the four relatively simple steps on how to make a revocable trust. Now that you’ve read the tips, it’s time to take some action.