Understanding Revocable Trusts: A Guide for Estate Planning

What is a revocable trust and why do I need one?

Revocable trusts, also known as living trusts, are estate planning tools created by individuals (referred to as donors) that can be altered or revoked during their lifetime. These trusts can manage the donor’s assets while they are alive, facilitate the distribution of assets after their death, or continue to benefit others beyond their death. Donors have the flexibility to act as the sole trustee, appoint one or more individuals as trustees, or designate others to manage the trust assets, either alone or collaboratively. 

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The Power to Amend

The Massachusetts Uniform Trust Code (MUTC), specifically G.L. c. 203E, § 602, establishes that trusts are presumed to be revocable unless the trust document explicitly states otherwise. This provision simplifies the process for donors, allowing them to amend or revoke their trusts as needed, provided the trust’s terms do not prohibit such actions. The statute states: “Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust.”

Funding the Trust

Trusts can be either funded or unfunded during the donor’s lifetime. In Massachusetts, many revocable trusts are initially unfunded. Instead, they are funded posthumously through a pour-over will, which transfers any remaining probate assets into the trust upon the donor’s death. Here are some critical aspects of using pour-over wills with revocable trusts:

Trust Timing: The trust must be executed before the will.

Funding: The trust can remain unfunded until funded by the pour-over will.

Amendments: The trust can be amended after the will is signed without invalidating the pour-over provisions.

While probate courts maintain jurisdiction over all trusts, a pour-over revocable trust is not subject to ongoing probate court oversight once it has been funded. Initial funding of a revocable trust often involves nominal amounts (e.g., $10 to $25), which, while customary in other states, is not necessary in Massachusetts. Notarization is not inherently required for revocable trusts in Massachusetts, except when the trust holds real estate. In contrast, other states like Florida mandate that pour-over trusts meet the formalities of wills.

Estate Planning Benefits

Revocable trusts offer several advantages over relying solely on wills:

Avoiding Probate: Assets placed in a revocable trust during the donor’s lifetime bypass the probate process. This can expedite asset transfers to beneficiaries and reduce legal and filing fees. However, the perceived benefits of avoiding probate are sometimes overstated, as some assets will inevitably remain outside the trust and require probate. Moreover, managing a funded trust can be administratively burdensome.

Privacy: A major benefit of revocable trusts is the privacy they afford. Unlike wills, which become part of the public record through the probate process, the contents of a revocable trust remain private. This means that details about the beneficiaries, trust assets, and distribution plan are not publicly disclosed.

Accounting Requirements: Trustees must provide accountings to beneficiaries annually and at the termination of the trust under MUTC Section 813. However, MUTC Section 105 allows for custom trust provisions that may alter this requirement. Trustees may opt for informal practices, such as sending accounts to beneficiaries and obtaining receipts and releases, to avoid formal probate court procedures.

Amendment Simplicity: In Massachusetts, amending a revocable trust does not require witnesses, unlike a codicil to a will. Additionally, trustees and the donor do not need to sign amendments in each other’s presence or at the same time for the amendment to be valid.

Guardianship and Conservatorship Substitute: A funded revocable trust can serve as a substitute for a conservatorship in non-adversarial cases. This allows for asset management during periods of incapacity or illness without court intervention, although it is not a perfect substitute. G.L. c. 190B, Article V.

Asset Management

Revocable trusts can also function as investment management vehicles during the donor’s lifetime. Upon the donor’s death, the trust can either distribute its assets to the estate or continue to serve as part of the estate plan. Unlike certain other assets, revocable trusts do not offer creditor protection.

In summary, revocable trusts offer flexible and private estate planning options, but they also require careful management and consideration of state-specific laws and practices.

Do you need a trust attorney?

If you need an estate planning attorney Houstoncontact Cote Law Group by calling +1 (781) 882-8001 or emailing bdebarros@cote-law.com. Cote Law Group offers free consultations and will help prepare a comprehensive estate plan that includes a revocable trust.

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