By Daniel Axman
For people seeking greater efficiency and flexibility in their estate planning, a revocable trust—also known as a living trust—can be a valuable tool. When structured and funded properly, a revocable trust allows for the seamless transfer of a person’s assets following his or her death, often without the need for court intervention.
Wills vs. Revocable Trusts: Key Distinctions
Both wills and revocable trusts play an important role in estate planning. A will governs the disposition of probate assets—generally, assets titled solely in a person’s name that do not have a beneficiary designation. Examples of non-probate assets that would not be disposed of by a will include jointly owned property, retirement accounts, life insurance policies, and assets held in trust.
A revocable trust, by contrast, can hold title to probate assets during a person’s lifetime. Upon death, those assets pass directly to the beneficiaries named in the trust agreement, potentially without the need for court-supervised probate proceedings.
Importantly, even when using a revocable trust, a “pour-over” will remains essential to capture any probate assets which were not transferred to the trust during the person’s lifetime. These assets would still pass through probate before being distributed to the trust and then to the beneficiaries named in the trust.
Why Consider a Revocable Trust?
While wills remain a common and appropriate planning tool in many instances, revocable trusts offer several distinct advantages that may make them the preferred choice in certain situations:
- Streamlined Administration
Generally, the person who establishes the trust is the sole trustee during his or her lifetime, making all decisions relating to the trust, its investments and distributions. Assets owned by a revocable trust can be distributed more efficiently after death, often without court oversight. In many cases, this results in a faster, more private, and less burdensome administration process for family members. This is especially important in states like Florida which require the filing of a detailed inventory as part of the probate process. - Immediate Access to Funds
Holding assets in trust may help avoid delays in accessing funds for expenses or ongoing support. In certain scenarios—such as where most assets are in one spouse’s name—this immediate access can be particularly important. Investment assets held in a trust can be sold or distributed to trust beneficiaries shortly after a person’s death without the delay of a probate proceeding. This can help prevent the investment portfolio from being exposed to market volatility during the probate process. - Facilitated Asset Management During Incapacity
A properly drafted revocable trust acts similarly to a power of attorney, enabling a successor trustee to step in and manage trust assets in the event of a person’s incapacity, thereby avoiding the need for a court-appointed guardian or conservator. Moreover, financial institutions typically favor working with the trustee of a trust over an agent acting under a statutory power of attorney. - Privacy
Unlike a will, which becomes a matter of public record when probated, a revocable trust generally remains private – even if unfunded at the time of death. And if fully funded, the names and addresses of trust beneficiaries will not be made public, which could be especially important if public figures are involved. - Future Flexibility
Revocable trusts are inherently flexible. They can be amended or revoked during the person’s lifetime, allowing the person to adapt his or her estate plan as circumstances evolve. - Reduced Future Court Involvement
In New York, the appointment of trustees of testamentary trusts (i.e., trusts created under a will) requires court approval, which can delay the orderly succession of trustees if a trustee dies, resigns or becomes incapacitated, and a new trustee is required to be appointed by the court. In contrast, court approval is not required for the appointment of trustees of a trust created under a revocable trust agreement.
Common Considerations and Limitations
- Asset Titling Is Key
To realize the full benefits of a revocable trust, the person’s assets must be properly retitled in the name of the trust or designate the trust as beneficiary. For example, the person can either retitle a bank account in the name of the revocable trust or ask the financial institution for a beneficiary form to designate the revocable trust as beneficiary. The banks commonly refer to these forms as POD (Pass-on-Death) or TOD (Take-on-Death) forms. If some assets are not transferred during life, probate may still be required – but the estate can still benefit from the trust’s structure and privacy. - Certain Assets Should Not Be Transferred
Retirement accounts and life insurance policies should remain outside the trust, as they pass via beneficiary designations. However, coordinating those designations with the terms of the revocable trust is crucial to ensure alignment with the overall estate plan. - Jointly Owned Assets and Real Property
Whether jointly owned assets – such as a residence held by spouses – should be split between two separate revocable trusts requires case-by-case analysis. For example, assets held as tenants-by-the-entirety may offer unique creditor protections. - Cooperative Apartments
Owners of co-op apartments should confirm whether the building allows transfers to trusts, as some buildings impose restrictions or significant fees that may make such transfers impractical.
What About Irrevocable Trusts?
Irrevocable trusts serve different planning purposes, such as asset protection and tax planning, and generally cannot be amended or revoked. A revocable trust, in contrast, is designed for flexibility and administrative ease—not creditor protection or tax mitigation. To be clear, revocable trusts do not provide any saving in estate tax, gift tax, or income tax.
Administrative Burden: Minimal
Revocable trusts are typically straightforward to manage during the person’s life. The person who establishes the revocable trust retains full control, there is no need for a separate tax identification number, and no additional tax filings are required.
Conclusion
Revocable trusts, when used strategically and in coordination with a pour-over will, can offer meaningful advantages in privacy, administration, and continuity of asset management. While a standard will may remain appropriate in many cases, people seeking a more flexible and efficient estate planning structure should consider whether a revocable trust is a suitable solution.
Contacts
If you have questions about whether a trust is appropriate for your situation, please contact a member of Golenbock’s Trusts & Estates team.
Daniel Axman, Partner
Trust & Estates, Tax
daxman@golenbock.com
(212) 907-7379
Steven Chill, Partner
Trust & Estates
schill@golenbock.com
(212) 907-7350
Donald Hamburg, Partner
Trust & Estates
dhamburg@golenbock.com
(212) 907-7380
Hailey Dobin Reichel
Law Clerk
*Pending admission to the bar
Golenbock Eiseman Assor Bell & Peskoe LLP
Golenbock Eiseman Assor Bell & Peskoe LLP is a Manhattan-based business law firm with a broad-based practice that offers corporate, complex litigation, labor & employment, real estate, reorganization, intellectual property, tax, and trust & estate expertise. The firm provides high value, sophisticated counsel and representation for its domestic and international clients while maintaining a hands-on, personalized approach to all matters.
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