This week’s post is going to provide a glimpse into nearly every estate planning consultation that I have with a client who is embarking on basic estate planning. Inevitably, we discuss whether the family needs a will or a trust. Its interesting that many families believe that trusts are only for the very wealthy. That assumption is simply not true. With this post, I would like to encourage you to consider what a Revocable Living Trust could do as part of your estate plan.
More and more people are beginning to realize that trusts are an important financial and estate planning option. Revocable Living Trusts have unique abilities to meet a host of personal and financial objectives. At its core, Revocable Living Trusts work to bypass probate. When a family passes their estate through trust, there is no need to file and open a probate estate. But there are many other advantages that can be accomplished with a Revocable Living Trust as well.
What is a Revocable Living Trust?
As the name implies, a trust involves putting assets in the hands of a trustee to oversee and manage the property according to the directions of the creator of the trust—also known as the “settler” or “grantor.” With a Revocable Living Trust, you reserve the power to amend or even revoke any trust provision you would like. You may adapt the terms of the trust as your circumstances change.
Another important point about the flexibility of a Revocable Living Trust is that you serve as your own trustee, or you may serve as a co-trustee with your spouse or an adult child. There is no need for a corporation or a bank be trustee for you. A corporate trustee or professional trustee unnecessarily drives up cost of trust asset management.
What is the benefit to having a Revocable Living Trust?
Another benefit of a Revocable Living Trust is that if the settler becomes incapacitated, the successor trustee (the person you named as the back-up trustee) can take control of the trust assets and manage them for the settler. This obviates the need to go to guardianship court, which is costly and time consuming, in order to provide for management of your assets.
In most cases, the provisions of a Revocable Living Trust remain a private matter. By contrast, a will becomes a matter of public record once it is presented for probate. If protecting the privacy of your financial affairs is a high priority, then considering a Revocable Living Trust is important for you.
Expediency is another benefit of passing your estate through trust. Upon death of the last settler, the successor trustee is able to quickly and efficiently arrange for the distribution of the remaining trust assets. A properly arranged estate plan can make a trust the central depository of all of your assets at death. With a pour-over provision in your will, you can direct the distribution of any of your probate assets into the Revocable Living Trust. Similarly, you can make your life insurance proceeds and retirement plan benefits payable to the trust. Gathering all of your assets in once place like this facilitates manageable and equitable distribution.
But back to the primary advantage of Revocable Living Trusts. When you pass your estate through trust, you can eliminate probate expenses. Estate administration costs are often directly related to the size of the probate estate. Administration costs, including court costs, attorney and personal representative fees, and so on, can range from 3% to 8% or more of the value of the probate estate assets. Since a living trust document provides its own distribution of trust assets upon death of the settler, those assets never become a part of the probate estate. This is just another way a Revocable Living Trust can save you time, money and headaches.
Here is another great blog by Julie Garber, written at the end of 2014, that tells more about the importance of Revocable Living Trusts. http://wills.about.com/od/fiveessentialdocuments/a/rlts.htm
The purpose of this post was to attempt to disabuse people of the notion that trusts are only for the very wealthy or for those who have complex estate plans. I encourage you to consider the Revocable Living Trust as part of your estate plan.
At Dillman Law Group we focus our practice on seniors and their families. Some elder law attorneys charge for an initial consultation, but some do not. There is nothing to lose by signing up for a free consultation with an elder law attorney at Dillman Law Group to talk through ways to protect your parents’ assets. Discussing these options and the future of your parents could save you money and stress later.
What is keeping you from scheduling a free consultation? Give our office a call today to schedule your free consultation at 317-492-9569.