An Irrevocable Trust Can Terminate

I often have clients that want an irrevocable trust.  I always advised them that, except in very specific situations that could involve the court, the trust can not be revoked, changed or revised.  Here is a common example of how a Irrevocable Trust might be used. 

The parents want to place their home in Trust for the benefit of their special needs child.  Upon his death, the home would go to the other surviving children.  We would start with a Revocable Trust for the parents.  The home would be placed in the Trust and the parents would go about their life as usual.  The terms of the Trust would specify that upon their death, the Trust will become Irrevocable.  The Trustees therefore could not revoke, change or revise.  However, there could be terms in the Trust that would provide for a termination of the Trust.  In this example, the Trust would in fact terminate upon the death of the special needs child.  The home would then transfer to the surviving children FREE of any trust terms. 

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Revocable Trust

I had yet another client who came to my office to update their current estate planning documents. The client needed to modify their Revocable Trust. The first question I always ask is "What have you placed in your trust?". When I get a blank steer, I know the client has not followed through on the most important part of having a Revocable Trust. You MUST retitle assets into the name of the Revocable Trust.

A Revocable Trust is a legal document. As a visual, I ask clients to think of it as a shopping cart. Once you have the shopping cart, you have to place items in it. Without these items, it is empty. The same applies to a Revocable Trust. If you do not retitle your assets into the name of the Revocable Trust, the Trust has not served its purpose. For example, if you want the Deed to your home or your brokerage account to be in the Revocable Trust, you would retitle those assets by changing from your name to "Your Name, Trustee for the Your Name Revocable Trust dated Execution Date."

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When should I have a Revocable Trust?

Question:
I live comfortably on my investments and retirement income. My sons are grown and only one of my grandchildren is under the age of 18. While my permanent residence is in Pennsylvania, I own real estate is several other states. How can I best set up my estate for ease of administration for my sons and grandchildren?

Answer:
This is where a funded Revocable Living Trust is ideal. There are many reasons to consider a Revocable Living Trust, one of which is when there is ancillary real estate, ie. real estate in more than one state. The use of a Will when you own real estate located in more than one state requires the filing of additional probate documents with each of the local probate courts. Local counsel usually must be retained in each of those additional jurisdictions. If the additional real estate is held in a Revocable Living Trust, however, the costs associated with these ancillary estate administrations may be reduced or avoided altogether. It would also be wise in your situation to provide for a trust for your younger grandchild and let your son, the child’s father, serve as the Trustee. These instructions can be provided in your Revocable Living Trusts.

If you want to know more about Revocable Living Trusts: The Pros and The Cons - The Reasons for Revocable Living Trusts and Whether They Address the Needs of You and Your Family CALL (215) 321-4033.

How can I best set up my estate?

Over the next few days, I will be answering questions posed by readers.

The first question I received was:

"How can I best set up my estate for ease of administration for my sons and grandchildren? I live comfortably on my investments and retirement income. My sons are grown and only one of my grandchildren is under the age of 18. While my permanent residence is in Pennsylvania, I own real estate New Jersey and North Carolina. How can I best set up my estate for ease of administration for my sons and grandchildren?"

In response to the question:
There are several ways to set up an estate for ease of administration. In your case a funded Revocable Living Trust would be very beneficial. There are many reasons to consider a Revocable Living Trust, one of which is when there is ancillary real estate.

The use of a Will when you own real estate located in more than one state requires the filing of additional probate documents with each of the local probate courts. In your case, this would be both New Jersey and North Carolina. Local counsel usually must be retained in each of those additional jurisdictions. If the additional real estate is held in a Revocable Living Trust, however, the costs associated with these ancillary estate administrations may be reduced or avoided altogether.

It would also be wise in your situation to provide for a trust for your younger grandchild and let your son, the child’s father, serve as the Trustee. You are not required to appoint a corporate trustee. You should name someone that you trust to follow through with the specific instructions provided in your Revocable Living Trust.

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