A revocable trust can be a valuable estate planning tool for many reasons, such as avoiding the time-consuming and financially draining probate process. In order to establish a revocable trust, the creator of the trust, known as the “grantor,” puts the trust in place and funds the trust by transferring ownership of assets over to the trust itself. The terms of the trust are set forth dictating how the trust is to be managed, who will manage it, and for whom the trust is to benefit. Here, we will speak more specifically regarding what trust terms should be included in a revocable trust document.
What to Include in Your Revocable Trust Document
The revocable trust document should clearly state that the trust is revocable. The revocability of the trust means that the trust terms can be amended and the trust can even be revoked entirely by the grantor at any time and for pretty much any reason. The trust document should also name the trustee who is tasked with managing the trust for the benefit of the named trust beneficiaries. It may be prudent to select an alternate trustee in the event that the primary named trustee is unwilling to serve. It may also be a good idea to name a subsequent trustee who would take over should the primary trustee pass away or be otherwise unable to serve.
One of the benefits of establishing a trust is that it protects against contests in court. The potential for avoiding legal challenges to a trust can be a big benefit as legal contests can be costly and time consuming. Judges are very reluctant to try and tamper with trust terms as set forth by the grantor as they do not want to misinterpret or undermine the wishes of the grantor. As an added layer of protection against legal challenges to your trust, you should consider including a no-contest clause in the trust document. A no-contest clause means that anyone who brings a challenge to the trust will not be able to receive any benefit from the trust. Those with a potentially vested interest in the outcome of a trust contest, therefore, would be remiss in actually attempting to contest it as they would lose out on any benefits from the trust.
A spendthrift clause can also be a very useful clause to include in your revocable trust document. A spendthrift clause restricts the ability of beneficiaries to access the trust principal and also can place restrictions on how, when, and under what circumstances trust distributions are made. The key benefits of a spendthrift trust are twofold. First, the clause will provide protection against any creditors of trust beneficiaries as the creditors will not be able to go after the assets held in trust in order to satisfy a debt owed by a beneficiary. Second, the clause protects against poor spending habits of a beneficiary or lack of money management skills. As opposed to leaving a lump sum to a beneficiary which could all too quickly be whittled away, a spendthrift clause can allow for the slow distribution of trust assets to beneficiaries over a specified time.
Estate Planning Attorneys
Are you interested in learning more about what a revocable trust can do for you? Talk to the knowledgeable team at Hyden, Miron & Foster about your options. Contact us today.