Revocable trusts are useful estate planning tools

Many Michigan residents include revocable trusts in their estate plans because these versatile instruments protect their assets while they are alive and give them more control over how their estate will be administered after they pass away. Revocable trusts are so named because their terms can be changed at any time. Revocable trusts may also allow estates to be administered without first going through the complex, public and sometimes expensive probate process.

Assets a revocable trust could protect

Revocable trusts are funded when assets are placed into them. These estate planning tools can be used to protect real estate, but properties must be retitled when ownership is transferred. This could be a problem if the property is encumbered by a mortgage as the lender would have to consent to the retitling. Other assets that are commonly placed in revocable trusts include life insurance policies, money market accounts, annuities, shares and tangible assets like jewelry, works of art and classic vehicles that are likely to appreciate in value.

Assets that should not be placed in revocable trusts

It is not wise to place retirement funds such as 401(k) or IRA accounts into a revocable trust because doing so would require a withdrawal and require taxes to be paid. Naming the trust as a primary or secondary beneficiary would ensure that retirement funds are transferred to the trust upon death and avoid a tax penalty. It is also inadvisable to place funds in checking or savings accounts into revocable trusts.

Estate planning tools

Revocable trusts are estate planning tools that protect assets, give their creators control over how their estates will be administered and may allow estates to avoid the probate process. Other useful estate planning tools include pour-over wills, special needs trusts, charitable trusts and durable powers of attorney.