Your friends and/or relatives may have mentioned that they have set up a revocable trust and urged you to look into creating one as well. While a revocable trust is a powerful and flexible estate planning tool, it is not a one-size-fits-all solution. I would caution engaging with an attorney who insists that creating a trust no matter what. Revocable trusts are more expensive to create than a simple Will, so an attorney may be motivated more by their pocketbook than looking out for your best interests.
That being said, generally speaking, a revocable trust is a wonderful estate planning tool that everyone should be educated about, even if it may not be currently suitable for them. Below are some of the benefits of having a revocable trust.
Avoiding Probate. All property transferred to a revocable trust will avoid the probate process upon the decedent's death. This means property may be held or distributed pursuant to the trust terms to beneficiaries without having to go through the court-supervised process known as probate. This is especially important for people who own real property since Hawaii probate law mandates that real property interests are subject to probate.
Control. One can draft the terms of the revocable trust to distribute trust assets to beneficiary in stages. This may be useful for those who have minor children who cannot legally own property or adult beneficiaries who may lack financial management skills. If a minor is a beneficiary of an estate or other property (e.g. life insurance proceeds), then a conservator will need to be appointed to manage the property until the minor reaches the age of majority, which is 18 in Hawaii. A trust can provide asset management until the minor child is an appropriate age. For an adult beneficiary who may be at risk of frittering away their inheritance, a trust can provide asset management by placing a third-party trustee in control of the assets and distributing income and principal to the beneficiary at regular intervals and/or at the trustee's discretion.
Asset Management. A revocable trust can also provide asset management for the person who created the revocable trust if the person becomes incapacitated for some reason. A successor trustee can step into the shoes of the incapacitated person and have the authority to access accounts to pay bills and manage financial affairs until the person gains capacity or, if the person remains incapacitated, provide ongoing asset management.
Disposition of Assets Upon Death. Like a Will, a revocable trust serves as a testamentary document and can determine how property is distributed upon a person's death. However, unlike a Will a revocable trust has many more features that may be useful depending on an individual's situation.
Samuel K.L. Suen is an attorney based in Honolulu, Hawaii specializing in estate planning, probate, conservatorship and guardianship matters.
DISCLAIMER: All content and information is provided by The Law Office of Samuel K.L. Suen, LLLC and is for general informational and discussion purposes only and does not constitute legal advice. Transmission of this information is not intended to create, and receipt does not constitute, a formation of an attorney-client relationship. The information presented at this site is believed to be accurate when made, but may not be complete, is not updated, reviewed or revised on a regular basis. No representations or warranties whatsoever, express or implied, are given as to the accuracy, applicability or validity of the information contained herein. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances. You should not act or rely on this information without consulting with a licensed attorney.
To ensure compliance with requirements imposed by the IRS, please note that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained herein.
Copyright © 2017 Law Office of Samuel K.L. Suen, A Limited Liability Law Company. All Rights Reserved.