Revocable Trusts

• Revocable trusts are created to control the handling of an individuals assets during their lifetime and to establish clear directions for the distribution of assets after the account owner's death. Trust documents refer to the person creating the trust as the settlor, grantor or trustor. A named trustee manages the trust although many settlor's manage their own trusts. Some revocable trusts name a successor trustee to assume control if the trustee dies or relinquishes control. Revocable trusts also name beneficiaries who receive assets or funds after the settlor dies.
  
  

Benefits of a Revocable Trust

• The settlor retains control of the assets in a trust because legally the settlor can change or terminate the trust at any time. Some people make changes due to a change in marital status or additions to the family. Additionally, assets assigned to a trust are passed to beneficiaries without the need for probate. This means assets are distributed more efficiently and avoids the legal expenses of probate. Some states such as California have statutory probate fees for real estate transfers that are avoided with the establishment of a trust.
  
  

Problems with Revocable Trusts

• There are many expenses involved in establishing a trust. Aside from the cost of hiring an attorney, the settlor must pay to transfer deeds on property into the name of the trust. This laborious process often proves costly for people with significant real estate assets. Additionally, many settlors have to make frequent changes to trust documents due to deaths and births among their extended families. Making sure all parties have updated trust documents requires a big time commitment.
  
  

Savings Account Management

• Revocable trusts are established under the settlor's Social Security Number. Any taxes due on the interest are paid by the settlor as an individual as opposed to the entity. This situation only changes after the settlor dies, at which time the trust entity must pay taxes. Aside from formal trusts, people can name pay-on-death beneficiaries to their accounts and the Federal Deposit Insurance Corporation and Federal Reserve also regard these accounts as revocable trusts and afford FDIC coverage of $250,000 to each beneficiary.