Part of estate planning involves preparing for situations where you may not be able to make your own financial decisions. An illness, an auto accident or the onset of dementia may impair your competency, which can lead to someone else taking over your finances. However, a revocable trust allows you to retain some control even if you become incapacitated.
Revocable trusts differ from irrevocable trusts in that you cannot shield the assets you place in a revocable trust from taxes. But if taxation is not your concern, you may find a revocable trust can help you in other ways.
Allowing a trustee to take over
You may decide to create a power of attorney that can step in for you in the event of your incapacitation. It is true that having a POA can be crucial if you want somebody you trust to make your financial decisions for you. However, when it comes to certain property and assets, setting up a revocable trust may be easier for your family. The reason is trustee succession.
As Kiplinger explains, if you create an individual trust, you should name a person as a successor trustee. If you suffer incapacitation, your successor trustee will take over the trust. If you create a trust with a spouse or a partner, he or she will exercise control over the trust when you cannot. Generally, it is not as complicated and less costly for a successor trustee to assume control than it is for a POA to take over.
Other measures that may assist you
A revocable trust gives you flexibility to handle various concerns you may have. You may change your successor trustee if you wish. If you want somebody who resides outside of your community to be your successor, you may find it easier to do so than trying to name that person in your will to be an executor.
Your trust can be of additional benefit to your heirs. Following your death, your revocable trust will pay out more quickly than if you passed on assets with your will. Also, a revocable trust will not become a part of the public record, preserving greater privacy for yourself and your heirs. While a revocable trust may not cover all your estate planning bases, it can be one vital component of your larger plan to handle your estate.