During this difficult time, having access to bank, investment, and other financial accounts is critical. With recent equity and bond market volatility, failing to act can be a risky and costly proposition. If you were hospitalized, or worse, if you died, how quickly could someone take control of your assets to protect them from further losses? The answer depends on how well you have planned in advance. Having a will, power of attorney, and health care proxy may not be enough.
When a person passes away, the court appoints an executor named in a will to collect and distribute the decedent’s assets to the beneficiaries. The executor can liquidate, buy, sell, and otherwise control all of the decedent’s accounts. However, until the court appoints the executor, no one can access the decedent’s accounts—and it can be many weeks, if not months, before the executor can access the decedent’s accounts.
There is an alternative for those who plan ahead: creating and funding a revocable trust. The trust is a separate legal entity that can own all of an individual’s non-retirement assets. By placing assets into a revocable trust, the trust’s creator is opting out of a probate proceeding and directing that the terms of the trust control the distribution of the trust’s assets.
During the creator’s lifetime, they can be the sole trustee or could name a spouse, family member, individual, or trust company as a co-trustee. A successor trustee would have the same access to the assets as the creator, so there would be little to no delay if the creator became ill or passed away. Even if the creator is the only trustee, following their death, the successor trustee can quickly take control and access the trust accounts, which is much faster than waiting for the court to appoint an executor after commencing a probate proceeding.
In addition to ease of access, the revocable trust has other benefits, including:
- Enhanced privacy, as filing a revocable trust with the court is not normally required, unlike with a will
- Minimizing the risk of a challenge by a disinherited or disgruntled family member. In a probate proceeding, the court requires that all potential beneficiaries are contacted when seeking to appoint an executor, even if the will completely disinherits that person.
- Avoids the need for probate proceedings in multiple states where a person owns real property
- Simplified signing requirements through electronic notarization, even though wills can now be executed remotely under recent authority
- Allows a creator to change their estate plan simply by amending the trust agreement to add or remove beneficiaries or to leave certain trust assets to specific beneficiaries
As part of the overall estate plan, a “pour-over” will is also signed at the same time as the revocable trust. The will specifies that any assets in the estate that were not funded into the revocable trust during a person’s lifetime are left to the revocable trust.
Having a cohesive and thoughtful estate plan is critical to ensure your financial, emotional, and other objectives are met. A revocable trust can play an important role in your overall estate plan.
If you have any questions regarding the content of this alert, please contact Tim Muck, partner, at tmuck@barclaydamon.com or another member of the firm’s Trusts & Estates Practice Area.
We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. You can reach our COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.