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The Benefits of a Revocable Trust

Zoe Team and Shaun Carney, CFP® (Zoe Network Advisor)

Sep 26, 2022

6 min read

A financial advisor reviewing a plan with two clients at a table

Key Takeaways

Revocable trusts offer control and flexibility over assets while alive.
Trusts allow for a smoother transfer of assets to heirs without probate.
They can provide privacy by keeping estate distribution details out of court.

Frequently Asked Questions

What is a primary benefit of a revocable trust?

A key benefit is avoiding the time-consuming and often costly probate process for your beneficiaries.

Can I change my revocable trust after creating it?

Yes, you retain full control and can amend or revoke the trust at any time while you are mentally competent.

Does a trust provide asset protection from creditors?

Generally, no; a revocable trust is transparent to creditors and does not provide shield-like protection for your assets.

An often neglected or misunderstood part of a complete financial plan is estate planning. The purpose of this blog is to discuss the pros and cons of estate planning methods. Specifically, the blog will focus on the benefits of a Revocable Trust.

Ever heard of Au Cheval in Chicago? If you’ve been among the lucky few to try the famous burgers from this upscale restaurant, you know getting the burgers without the fries is basically equivalent to not going. Financial planning is similar in this way, you want the whole package to be satisfied. The protein, fries, a drink, and maybe even dessert are what make the meal. Investment management, tax strategy, insurance planning, and estate planning are all part of a complete financial plan.

Estate Planning 101

What is estate planning? The primary goal of estate planning is ensuring assets and property pass to 1) who you want, 2) when you want, and 3) how you want. There are several methods to accomplish this goal. We will explore common misconceptions or pitfalls of these methods and discuss the benefits of a Revocable Trust.

Missing Part of the Meal?

A typically financial planning client believes a proper estate plan is complete when the Will is complete. Unfortunately, for most people, that is not the case, and this is an incomplete estate plan. In addition, most people are unaware that an estate plan by Will guarantees court involvement. A Will is essentially a set of instructions to a judge. This means assets and property become public knowledge because most court documents are public records.

Additionally, due to court and attorney costs and delays, assets could be delayed getting to heirs. Finally, a judge may not be able to abide by the instructions in a Will. An example is a married couple where Spouse A stated in their Will that they would like their 401(k) balance to pass to their child. A judge may be bound by state law to ensure the 401(k) credit passes to Spouse B. Therefore, even though a Will is an essential aspect of estate planning (especially if a family needs to appoint a legal guardian over a minor child), an estate plan is typically not complete when only a Will is finalized.

Titling Accounts as a Bridge to Estate Planning

Titling accounts is another method of estate planning. This method includes naming beneficiaries on all accounts. Here are a few examples:

A retirement account or insurance policy could have a primary and contingent beneficiary.

A bank checking or savings account could have Transfer on Death (T.O.D.) or Payable on Death (P.O.D).

Home or account might be Joint Title With Rights of Survivorship (JTWROS).

A business may be Tenets in Common.

There are many methods of titling accounts to pass ownership. The benefits of estate planning by titling accounts are the estates typically give outside of court, which avoids court and attorney fees.

The assets and property can pass if there is proper titling done. The pitfall in this method is that the assets would pass immediately to the named beneficiary. For this reason, it may not be the most effective strategy. An example of a trap would be a 401(k) with a $1M balance passing to an 8-year-old child beneficiary or an immature 22-year-old beneficiary. There may be several reasons for the account owner stipulating when and how the beneficiary would receive the assets. For those reasons, a Revocable Trust may be a better option.

A Full Sized Meal

A Revocable Trust has many benefits. Among these there are three primary benefits for a typical financial planning client.

The distribution of assets occurs outside of court.

The account owner maintains control of the assets after they pass away.

The Revocable Trust is changeable while the account owner is alive.

Unlike a Will, which guarantees court involvement, a Revocable Trust avoids court, saving the beneficiary time and costs associated with courts and attorneys. The account owner selects a Trustee of the Revocable Trust to act as a fiduciary and ensure the wishes of the account owner are carried out as stated in the Revocable Trust.

The account owner can stipulate the distribution of assets to the beneficiaries. An example of such stipulations may be distributing half the assets in the Revocable Trust to the children once they reach age 35 and the other half when they reach 40. Another example would be ensuring the beneficiaries do not have an alcohol, drug, or gambling addiction before the assets are released from the Trust. There are no limitations to the creativity of these stipulations. They avoid the pitfalls of estate planning by titling accounts because the assets do not pass immediately to the beneficiaries. Instead, the beneficiary must meet the account owners’ stipulations before releasing the assets, giving the account owner control from the grave. The stipulations are changeable throughout the account owner’s life.

This is important because the account owner maintains control which keeps the assets in the account owner’s estate. This type of Trust differs from a Non-Revocable Trust, where the stipulations remain unchanged. These two types of trusts are often misunderstood when working with a typical financial planning client.

Benefits of a Revocable Trust:

Avoids probate

Maintains control after death

Privacy maintained

Changeable during life

Eliminate people from challenging your estate

Management continuity

Ease of asset transfer at death

Recap of a Revocable Trust

There are many methods of estate planning as well as pros and cons to each approach. A proper estate plan includes all the strategies discussed. In a typically first meeting with a financial planning client, it is uncommon for a client to have a complete estate plan in place. Most families do not think about and implement an estate plan until they lose a parent and start the distribution process. Many realize the benefits of a proper estate plan during the hassle of distributing the assets. To avoid the conflicts and struggles they experienced for their children, they begin the estate planning process themselves. One of the many benefits of partnering with an advisor from the Zoe network is to avoid the pitfall of delaying the implementation of a proper estate plan for a family.

Estate Planning 101

Missing Part of the Meal?

Titling Accounts as a Bridge to Estate Planning

Titling accounts is another method of estate planning. This method includes naming beneficiaries on all accounts. Here are a few examples:

A retirement account or insurance policy could have a primary and contingent beneficiary.

A bank checking or savings account could have Transfer on Death (T.O.D.) or Payable on Death (P.O.D).

Home or account might be Joint Title With Rights of Survivorship (JTWROS).

A business may be Tenets in Common.

A Full Sized Meal

A Revocable Trust has many benefits. Among these there are three primary benefits for a typical financial planning client.

The distribution of assets occurs outside of court.

The account owner maintains control of the assets after they pass away.

The Revocable Trust is changeable while the account owner is alive.

Benefits of a Revocable Trust:

Avoids probate

Maintains control after death

Privacy maintained

Changeable during life

Eliminate people from challenging your estate

Management continuity

Ease of asset transfer at death

Recap of a Revocable Trust

Disclosures: Zoe Financial, Inc. ("Zoe Financial") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Zoe Financial provides investment advisory services and access to independent registered investment advisers through its platform. The information provided by Zoe Financial is for educational and informational purposes only and should not be construed as personalized investment advice or as an offer to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Clients should consult with their own financial, tax, or legal professionals before making any investment decisions. The material presented by Zoe Financial is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Past performance is no guarantee of future results. Zoe Financial does not provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice. SEC Registration does not constitute an endorsement of Zoe Financial by the SEC nor does it indicate that Zoe Financial has attained a particular level of skill or ability. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be appropriate for all clients. Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance. Lower expenses do not guarantee better investment performance. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements.

Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.

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Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.

(646) 680-9244

support@zoefin.com

666 Third Ave, 6th Floor
New York, NY, 10017

Zoe ADV

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Explore the Zoe Wealth Platform with AI

Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.

(646) 680-9244

support@zoefin.com

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New York, NY, 10017

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