What is a Revocable Trust? Bespoke Estate Law Explains

A revocable trust provides an additional method for managing your property during your lifetime and after your death. It gives you the freedom to control the distribution of your assets after your death, even spanning multiple decades if desired. In this article, we will discuss the nature of a revocable trust, the advantages, and its formation. For a consultation with our estate planning firm in Myrtle Beach, please get in touch - we help people just like you throughout coastal SC and NC.

What is a Revocable Trust?

A revocable trust, also referred to as a living trust, is a legal declaration which allows the trustor to place their property in a trust vessel while retaining control of the assets. With a revocable trust, you may modify or revoke the trust at any point during your lifetime. You may retain a substantial beneficial interest and the power to manage investments in the trust (S.C. Code Section 62-7-401(2)(c)).

Generally speaking, a trust is a legal arrangement whereby a person holds property for the benefit of one or more beneficiaries. It is a written declaration by the owner of the property, the trustor, transferring property to another person, called the trustee, during the trustor’s lifetime or upon the trustor’s death (S.C. Code Section 62-7-401(2)). A trustor can also serve as the initial trustee under a revocable trust.

Why You Should Have a Revocable Trust

In South Carolina, probate proceedings can be lengthy and costly. This can lead to a significant delay in the distribution of your property after your death. The Probate Court may also implement a distribution scheme for your assets that you did not intend.

One of the main reasons for creating a revocable trust arrangement is to avoid probate proceedings. With a revocable trust, the distribution of your assets is not supervised by the Probate Court via probate administration. Instead, the property will be transferred directly to the beneficiaries, thus avoiding the time-consuming probate proceedings.

Another benefit of a revocable trust is the privacy it provides for yourself and your beneficiaries. Since trust assets avoid probate, no aspect of the trust is filed with your county of residence. If you do not have a trust, your affairs are settled in the Probate Court, where all filings are public record, and anyone can see what assets you had and who received them.

Moreover, a revocable trust provides flexibility and control over your assets. You can choose which property to place in the trust, and implement a distribution scheme over the course of a period of time. A revocable trust is fully amendable, and you can revoke it entirely if desired. This flexibility can be essential if circumstances necessitate the amendment or revocation of the trust, such as changes in the family dynamics.

Creating a Revocable Trust in South Carolina

At the outset, you must determine your goals in the creation of a revocable trust. You must identify your current property, successor trustee, beneficiaries, contingent beneficiaries, and whether your beneficiaries will receive assets outright or have them held in trust for their benefit.

In choosing a trustee, you need somebody completely trustworthy and reliable. The trustee may be a family member, friend, or a professional. Selecting a trustee is crucial since the trustee is tasked with managing your property upon your death.

The next step is to draft the revocable trust, outlining the property placed in the trust and describing how the property is distributed. To ensure the trust follows the South Carolina Trust Code, you should consult with an attorney to help you draft your revocable trust.

The revocable trust becomes effective when it is funded. Funding the trust means transferring your assets into it. The process involves changing your property titles to reflect the property transfer to the trust.

When the revocable trust is funded, you need to maintain it by modifying the trust to reflect any changes in your wishes or life circumstances.

Legal Implications of Trust Formation in South Carolina

In South Carolina, notarization of a revocable trust is not required for its validity. However, it is recommended to ensure the instrument's acceptability by financial institutions, government agencies, and third parties.

It must be noted that a revocable trust does not offer tax benefits during the trustor’s lifetime (26 U.S. Code § 671). In a technical sense, you remain the owner of property placed into the trust arrangement. Thus, you need to declare the income the trust property generates on your individual income tax return.

Contact Our Estate Planning Attorneys if You Have Questions

A revocable trust is one of the most comprehensive and flexible options for estate planning. You can be assured that your assets will be distributed exactly according to your wishes, while maintaining control of your assets during your lifetime.

If you want to create a revocable trust, we provide comprehensive trust formation services in Wilmington and throughout South Carolina and North Carolina. We would be happy to help you.