REVOCABLE TRUSTS:Estate Planning Lawyer in NY, explains living trusts

(prHWY.com) March 13, 2012 - Albany, NY -- This is Part Two of a two-part article on some of the advantages of using revocable trusts, also called living trusts, in estate planning, either instead of a will or along with a will.

Recall that a revocable trust is a written agreement that names someone (a trustee) to manage your money and property, usually first for your benefit and then, upon the happening of an event, such as your death, for the benefit of others. As long as you are competent you are able to change or terminate the trust at any time, for any reason or for no reason. During your lifetime, typically you are the trustee as well as the sole beneficiary.

What are some more advantages of a revocable trust? (When we speak of the "advantages" of a revocable trust, keep in mind that we are usually talking about a revocable trust as compared to a will or as compared to dying without a will.)

Some more advantages of a revocable trust include the following:

5. The statutory rate of compensation ("commissions") for a trustee is less than the statutory rate of compensation for an executor of a will or an administrator of an estate of a person dying without a will. Where you have a family member or a friend as the trustee (but not a corporate trustee), the trustee commissions are as follows: for paying out all sums of money constituting principal, the trustee is entitled to a commission of 1%; the trustee also gets an annual commission based on the principal value of the trust, as follows: 1.05% on the first $400,000.00 of principal, 0.45% on the next $600,000.00 of principal and 0.30% on the rest of the principal.

On the other hand, the commission for an executor or an administrator is much higher: 5% of the first $100,000.00 of principal, 4% of the next $200,000.00 of principal, 3% of the next $700,000.00 of principal, 2.5% of the next $4,000,000.00 of principal and 2.0% of the remaining principal.
6. A revocable trust is not a public document, while a will, once filed in the Surrogate's Court when a probate proceeding is commenced following your death, becomes a public document.

7. Suppose you become incompetent during your lifetime, for example, you suffer a serious stroke? In that case, the trust will have the benefit of saying how your money and property are to be managed and invested, and spent or distributed for the benefit of beneficiaries and, of course, for your benefit while you are alive. If you have placed substantially all of your property in the trust before you become incompetent, you may also avoid the need for a court proceeding to appoint a guardian of your property.

8. But, what if you become incompetent before you are able to put substantially all of your money and property into the trust? The answer to this is to, when signing the trust agreement, also give to someone you trust a power of attorney to put the remainder of your money and property into the trust with the understanding that he or she is only to do so if and when you become incompetent.

9. You can be the trustee of your revocable trust. This will give you the same powers of control that you would have had if you had not placed your money and property in the revocable trust. In other words, as to money and property placed in your revocable trust, you maintain control just as you would if you had not created the trust.

In sum, a living trust is in essence a testamentary substitute. You may draft your trust agreement to say most of the same things that you would say if you were drafting a will.

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