Revocable Trusts — When to Use Them and Why

Revocable trusts and the assets they hold are less secure against lawsuits or nursing home expenses than irrevocable trusts because the trust creator has the ability to revoke the trust and regain ownership of the assets it holds. As a Dayton trust attorney I often get asked, “Why use them at all? “

The simple answer is that they achieve three primary asset protection goals while allowing the trust creator (or grantor) to control the assets and change the trust’s beneficiaries and terms. An irrevocable trust cannot be changed once it is set up.

3 Estate Planning Objectives Achieved Through Revocable Trusts

Let’s look at these in more detail . . .

1. Avoid Probate Court
Under Ohio probate laws, all assets in an individual’s sole name must be probated in probate court unless protected by a trust. In probate court, a judge ensures that all applicable taxes and creditors are paid and the remaining assets are distributed as outlined in the decedent’s will or according to Ohio law if there is no will.

When assets are placed in a trust, the assets are managed according to the terms of the trust and avoid probate court completely. With a revocable trust, the creator/grantor can change the terms of the trust, or revoke it completely, if necessary. This feature is great for people with 20 or more years of life expectancy as their life situation is subject to change. As a Dayton trust attorney, I typically recommend irrevocable trusts for people 80 years or older and revocable trusts for people younger than 50. For folks in the 51-79 year range, I usually recommend a combination of both.

2. Minimize Estate Taxes for Married Couples
When a spouse dies, the surviving spouse will receive all of the couple’s assets without paying estate taxes. However, upon death of the second spouse, the estate may be subject to federal and Ohio estate taxes. When only a will is used, the estate must go to probate court in accordance with Ohio probate laws and only the estate tax exemptions of the second spouse can be applied. However, if protected by a properly structured trust, the exemptions of both spouses can be applied, thus doubling the amount of assets not taxed.

3. Create a Legacy Trust for Children
If your heirs include children, a “legacy trust” can be created to protect the child’s inheritance from divorce, lawsuits, and bankruptcy. Also, if a child receives their inheritance in a legacy trust, their estate will not have to pay estate taxes upon their death.

Free consultation to determine your estate planning needs. Don’t try to handle your estate planning on your own. Ohio probate laws and laws regarding irrevocable and revocable trusts, wills and other estate planning factors are complicated. You need the help of a Dayton trust attorney to ensure your planning is done correctly. Call my office today at 1-877-483-6730 and schedule a free initial consultation with me. I’ll recommend a course of action that best meets your needs.

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