What are some of the benefits of a revocable living trust?

Many people believe trusts are only for the wealthy, but revocable living trusts are about more than just the size of your estate.  Revocable living trusts serve many uses and are an effective tool for reducing lifetime expenses, preserving wealth and protecting your family and assets.

Here are some of the reasons you may wish to consider including a revocable living trust in your estate plan:
  • Privacy. A will is subject to the probate process and is therefore a matter of public record.  Anyone with prying eyes can learn the details of the size and recipients of your estate.  By comparison, a trust is a private document that is not subject to probate, so you don’t have to worry about nosy people snooping in your family’s personal affairs.

  • Simplicity. Spending a little time with your attorney now can save your family time and aggravation after your death.  The probate process can be expensive, time consuming and an administrative headache.  A trust, on the other hand, can be a cost-effective solution that saves your family from unnecessary aggravation in their time of grieving.

  • Access. If something happens to you, your family’s access to funds for necessary living expenses could be limited.  A properly drafted trust can ensure that the funds will be available when you family needs them.

  • Divorce. Let’s say you execute a will while your children are young, put it in the safe, and forget about it.  Several years down the road, you die and your assets pass to your adult son who is married.  A few months later, your son’s wife files for divorce and as part of the divorce settlement, she walks away with a substantial share of your son’s inheritance.  This situation could have been avoided if a living trust with appropriately drafted provisions.

  • Lawsuits, bankruptcy or creditors. Similarly, if a trust is carefully drafted it can offer your family protection from losing the trust assets to bankruptcy, creditors or in a lawsuit.  So for example, say your surviving spouse or child causes a fatal car accident and is subsequently sued—their inheritance that you left to them in trust, can be set up in such a way that it would be protected from the lawsuit.

  • Control. No one knows your family better than you.  A trust can give you more control over how your assets are distributed to family members.  This can be especially important for younger or less financially responsible children.  For some, receiving a large inheritance brings the temptation to spend it on luxury items or brings the risk of long-lost family and “friends” asking for handouts.  Statistics show that regardless of a child’s age or the size of the inheritance, most inheritances are spent within 18 to 36 months of their receipt.  A trust allows you to appoint a responsible trustee to manage the assets of the trust and ensure that assets are not frivolously wasted.  A trust also gives you power to control the timing of distributions and the circumstances under which distributions will be permitted.

  • Continuity. Especially for estates that include real estate, business interests or stock portfolios, a trust can provide continuity of the management of the asset without disruption or risk of sale in the probate process.

  • Taxes. For larger estates, trusts have the additional benefit of permitting planning to reduce or eliminate potential estate tax liability, thereby preserving more of your hard-earned assets for your family.  When estimating the value of your estate, it is important to remember that real estate, bank accounts, stock portfolios, life insurance policies, retirement accounts, business interests and all personal property are included in determining the value of your estate for tax purposes.  When you factor in items such as large insurance policies, the size of your estate may be larger than you realize.

  • Ease of creation, use and amendment. Living trusts are easy to set up and can easily be updated from time to time.  Living trusts are also legal in all states, making them highly portable if you move out of state.

  • Reduced likelihood of attack. Due to their private nature and the law, living trusts are less likely to be challenged in court than a will, and if they are challenged, the lawsuit is unlikely to succeed.

  • Asset management. For family members that are less astute at managing finances, a trust allows you to appoint a trustee to manage the assets on behalf of your family.  This can also be useful for managing assets located in a state different from the state in which your family resides, such as real estate or business interests located out of state.

  • Subsequent marriages. If you have children from a prior marriage, a trust can ensure that your current spouse will be provided for adequately through regular distributions, but that the trustee will preserve the remaining assets so that they pass to your children rather than your spouse’s family.  Similarly, in the event that your spouse remarries after your death, a trust can be used to ensure that your assets are passed to your children rather than the new spouse.

  • Take Care of Yourself. By setting up a trust during your life time, you can also arrange for your own well-being if you become incapacitated or incapable of managing your affairs.  This allows you to stay in control of who will decide when and if you are incapacitated, who will then manage your assets, and instructions from you as to how you want your assets to be managed.

  • Eliminate multiple probate proceedings.  If you own real estate is more than one state, then upon your death, a probate proceeding would need to be initiated in each state, which can be time consuming and expensive.  If the property is instead placed in a living trust, out-of-state probates will not be required.  Similarly, even for in-state property, if the property is located in different counties, than during the probate process, additional filings will be required in each county in which property was located (these are known as “ancillary proceedings”).  Again, if the property is instead owned by your living trust, this can reduce the need for such ancillary proceedings.