Revocable Trusts

A revocable trust is a legal arrangement whereby you, as the grantor, transfer ownership of assets to a trustee while still retaining control over those assets. As grantor, you retain the right to change the terms of the trust or revoke it entirely at any time during your lifetime. A revocable trust is often used to avoid probate and manage your assets if you become incapacitated, allowing for a smoother distribution of your property after death to your chosen beneficiaries. It also affords your estate greater privacy because the trust property does not have to go through probate.

Advantages

Avoids probate: A revocable trust avoids the legal process of probate, which is required for assets transferred through a will. However, a simple “pour-over” will is still necessary even if you have a revocable trust.

Privacy: A revocable trust allows for the transfer of assets without public scrutiny.

Flexibility: You can make changes to your trust at any time, including naming new beneficiaries or trustees.

Incapacity planning: If you become incapacitated, the successor trustee you name in your trust agreement can take over your affairs without court intervention.

Asset management: You can use a revocable trust to consolidate and manage assets, including real estate, financial assets, and private business interests.

Limitations

No current tax benefits: A revocable trust doesn’t offer direct tax benefits while you are alive. However, the planning you do (as expressed in the trust agreement) could generate tax savings after your death, such as by effectively taking advantage of your estate tax and GST tax exemptions.

No creditor protection: A revocable trust does not provide much protection from a divorcing spouse, creditors, or lawsuits. If you need such protections, you might consider exploring the benefits of irrevocable trusts.

Setting up a Revocable Trust

To establish a revocable living trust, you will need to:

1. Create a written agreement or declaration that appoints a trustee to manage and administer your property. We advise working with your attorney to create the trust agreement.
2. Name a competent adult, bank, or trust company as your trustee. You can also act as a trustee throughout your lifetime.
3. Transfer your assets into the trust, including:

• Investments
• Bank accounts
• Real estate
• Business interests
• Other assets (such as tangible personal property)

At this point, “you” no longer own those assets; instead, they belong to the trustee. However, because this is a revocable trust, you retain control of the assets while you’re alive. You can amend or change the trust at any time. Even if you become incapacitated, the trust can still be modified according to terms specified in your trust agreement or by state law (usually for administrative purposes).

Income earned by the trust’s assets is payable to you and is taxable to you. During the grantor’s lifetime, a revocable trust will use the grantor’s Social Security Number as its taxpayer ID. The trust’s assets do not transfer from the trust to your beneficiaries or future trusts until after your death—at which time a new tax identity is established.

Working with 1919 Investment Counsel

1919 Investment Counsel can provide services to trustees, including:

• Fiduciary investment management
• Trust administration:
  • Principal and income accounting (through our network of preferred custodians)
  • Periodic remittances of income and principal
  • Outsourcing the preparation and filing of tax returns
  • Coordinating with your attorney and tax advisor

And our affiliate, Stifel Trust Company, N.A. can:

• Act as trustee
• Exercise discretion on behalf of beneficiaries
• Settle an estate by acting as executor, personal representative, or agent

Stifel Trust Company, N.A. partners with 1919 Investment Counsel and can act in all 50 states.

Feel free to contact your Portfolio Manager or Client Advisor about revocable trusts and how 1919 Investment Counsel can assist you with your estate planning. As always, we advise that you work with an attorney and tax professional when setting up a new trust. Estate planning and trust administration is a complex process which requires professional guidance.

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