How Revocable Trusts Are Replacing Wills For Some

It’s an unfortunate fact, but around two-thirds of Americans have no estate plan at all. Fortunately, this number starts to decrease at certain income levels — and among those with a plan, the majority utilize wills. However, an increasing number are opting for trusts over wills. That’s because there are many benefits of establishing a revocable trust in Iowa.

Establishing a trust has higher upfront costs than creating a will, which has historically led individuals to opt for the latter. However, more and more people are realizing that trusts offer an increased level of control along with substantial savings during the Iowa probate process. For this and many other reasons, it’s important to at least consider a revocable trust.

Avoidance of Probate

When most people die, their estates go through probate. Unfortunately, this can be a costly and time-consuming process. The great thing about a revocable trust is that it doesn’t just reduce probate costs. In some instances, it can actually eliminate them altogether. A trust allows assets to pass directly to beneficiaries.

In addition to the cost and time savings related to avoiding probate, a revocable trust also offers a significant level of privacy in Iowa. Probate is a public process, so anything in a will becomes public knowledge. Fortunately, trusts are not public records. Therefore, you can pass assets to your loved ones without prying eyes taking note.

Flexibility and Control

There are various types of trusts you can choose from. If you want to maintain flexibility and control, you’ll be glad to know that these are two key benefits of establishing a revocable trust in Iowa. That’s because the creator of the trust (i.e., grantor) maintains control of trust assets as long as they’re alive and not incapacitated.

This means they can modify the terms of their trust or fully revoke it at any time. This flexibility makes it easy to adapt your estate plan based on changing circumstances. After all, things can change in life. Marriages, divorces, new heirs, family disagreements, and a variety of other events can necessitate changes to an estate plan.

When you have a revocable trust in Iowa, adjusting to such events becomes a simple endeavor.

Management During Incapacity

When a person creates a revocable trust, they typically choose to designate themselves as the trustee. This means they can manage and distribute the trust’s assets in any way they see fit — as long as doing so is within the confines of the trust terms they set. However, the grantor will also choose a successor in case they become incapacitated.

The successor trustee you choose can step in and manage your trust assets if you’re unable to. This happens without the need for a court-appointed guardianship, which ensures that your affairs continue to be handled according to your wishes. And if you recover from whatever incapacitated you, you can step right back into your initial trustee role.

Streamlined Distribution of Assets

While revocable trusts are great for incapacity planning, many people set them up so that their estate is administered properly when they die. Fortunately, these trusts greatly streamline the distribution of assets. This isn’t simply true because it’s possible to avoid probate. In reality, one of the primary benefits is the ease of distribution.

This is true both during and after the grantor’s life. Assets within the trust merely need to be distributed as described within the trust. There’s no need for probate or other complex processes. The grantor decides how they want assets distributed, and the trustee facilitates the distribution.

Continued Asset Management

When a person dies, there’s often a disruption in the management of their assets. In the majority of cases, this isn’t a significant concern. For instance, it’s unlikely that there will be major consequences just because the family home isn’t maintained for a week. However, serious issues can occur when complex assets are involved.

For instance, investment properties and business interests need constant management. If the owner of these assets becomes incapacitated or dies, their chosen successor trustee can step right into the management role. This greatly reduces the likelihood that problems will arise simply because the grantor is unable to make decisions.

Tax Implications

Unfortunately, revocable trusts do not provide direct tax benefits. During the grantor’s life, all assets contained in the trust are treated as part of the estate for tax purposes. After they die, the assets are included in their estate for tax purposes.

However, a revocable trust can be used as part of a broader estate planning strategy to minimize estate taxes. When properly structured, these trusts can reduce the taxable estate and provide for more efficiency in tax planning.

Protecting Beneficiaries

Many people utilize trusts in a similar manner to wills. They designate beneficiaries, and they can stipulate how assets will be distributed. In addition to the many other benefits of establishing a revocable trust in Iowa, these stipulations can help protect beneficiaries. Rather than providing heirs with a lump sum, you can designate how and when assets should be distributed.

This is an important benefit for beneficiaries who are young, have disabilities, or are inexperienced or reckless with money. However, you want to make sure that you set up your trust in such a way that it’s legally enforceable and actually accomplishes the goal you want to achieve. That’s why it’s advisable to work with an estate planning attorney when establishing a revocable trust in Iowa.

At Scott Shoemaker & Associates, our legal team is committed to helping our clients create ideal estate plans for their circumstances. Contact us at 319-379-2007 to schedule your confidential case evaluation.