Revocable Trusts in Alabama
What is a Revocable Trust in Alabama?
Revocable Trusts are often used when someone wants to leave certain property to a beneficiary, but not all at one time. Having the property managed in a trust is an excellent way to ensure that the beneficiary will receive the property and only in the manner that has been outlined in the Trust by the owner, or “Settlor”. A Settlor can revoke a Revocable trust at any time. Revocable trusts can contain any number of beneficiaries.
A Trust does not have to contain the Settlor’s entire estate. A Trust will contain only particular items that have been properly placed into it by the Settlor.
How Can One benefit me?
- Creates a seamless transfer of property to beneficiaries without the need for probate.
- Because a revocable trust bypasses probate, the beneficiaries can receive the trust property automatically upon the death of the “Settlor”. Otherwise, the beneficiaries would have to wait no less than six months after the probate case is opened to receive the share from the estate.
- The Settlor retains authority and power to revoke the trust at any time. The Trustee does not have to consent to this.
- A revocable trust is often managed by the trustee, without supervision from the court.
- The Settlor can control how the trust gets distributed by the Trustee (e.g. all at once, over time, upon the occurrence of a particular event, etc.)
Are there any drawbacks?
- More expensive than creating a Last Will and Testament.
- Requires that a trustee be appointed. Trustee is tasked with responsibility of maintaining good records and acting in the best interest of the Trust.
- Funding Challenges- If a person is constantly buying and selling property, a revocable trust can be challenging since it requires continual updates. If the assets are not properly tied to the trust, they will be locked out. A “pour-over” will can still distribute said property to an intended beneficiary, but the pour-over Will has to be probated to be given legal effect.
- A revocable trust is not the best option for shielding assets from creditors.
- A revocable trust does not prevent Medicaid’s estate recovery program.
- Limited transparency- The trust is managed by the trustee and court intervention is generally not an option absent the trustee acting in bad faith or with fraud.
- Trustee’s compensation: A trustee does not work for free, especially if the trustee is a bank. A trust can cost hundreds if not thousands of dollars each year in trustee related expenses, alone.
Is a Revocable Trust worth it?
Maybe. The decision to incorporate trusts into your estate plan is often more expensive than leaving a will and going through probate.
However, it is true that a revocable trust can be an asset it if it is properly set up and meticulously managed by a competent trustee for the entire life of the trust. Otherwise, the money spent investing in the trust will be a total waste if not fully tended to if it is the settlor’s goal to avoid probate. Before anyone decides to form a revocable trust, it is important they have the financial means to keep the trust afloat for the entirety of its life.
Take for instance when a doctor prescribes you an antibiotic regiment when you get sick. Half way through it can be tempting to discontinue the medication after you begin feeling “well” and especially if the medication has unpleasant side effects, etc. However, if you don’t take the complete dose, you certainly run the risk of relapsing and having to go back to the doctor.
The problem with the medication example is that the patient may still get better without finishing the entire dose. However, if the same approach is taken to trust management, a much different outcome will result.
Schedule an Estate Planning Consultation with a Spanish Fort, Alabama Attorney
Whether you reside in Spanish Fort, Daphne, Fairhope, Gulf Shores or anywhere else in Baldwin or Mobile Counties, Brennan R. Clifton, Attorney at Law, will assist you in developing an estate plan that is right for you. Our firm believes that getting to know our clients and asking lots of questions is the cornerstone in providing our clients with exceptional legal services.
Call or text us at 251-422-6417 to find out more about how our firm can assist you with your estate planning goals.