Advantages of a Revocable Living Trust
For some individuals and families, a will-based estate plan is adequate. However, others may want to think about creating a revocable living trust as the foundation of their estate plan. As compared to a will, the revocable living trust has a few distinct advantages.
The first advantage of a revocable living trust is probate avoidance. If you have a will, then whenever you pass away the will must go through the court-monitored process known as probate in order to pass title of your property and assets to your heirs. Probate can be expensive, with attorney fees potentially running several thousand dollars. What is more, probate may invite claims by creditors and challenges to your will by disgruntled family members who were cut out. Lastly, probate makes your estate public knowledge. In probate, the will must be filed with the court, meaning people can see to whom you left your estate and in what amounts. The executor is also required to submit an inventory to the court listing the value of all of your property and assets.
Unlike a will, it is not necessary for a trust to be probated. Instead, your affairs are handled out of the public eye. While there are likely to be some fees associated with distributing the trust to the beneficiaries you name, in many instances the expense is less than probate. Additionally, trusts do not need to be filed with the court. Most of the time, the court will not order your trust opened. Therefore, the details of your trust remain private.
A second advantage of the revocable living trust over a will is control with regard to distributions. With the exception of minors, the persons you name in your will receive their inheritance outright. By contrast, a trust allows you to give instructions about how and when the beneficiaries of your trust get their inheritance. For example, you can specify that beneficiaries do not receive anything until they reach a certain age or their inheritance is held in a separate trust for them to be spent only on particular things such as education. This has the added bonus of protecting the beneficiaries of your trust from creditors, ex-spouses and others seeking to gain access to their inheritance.
Finally, revocable living trusts can provide for your incapacity. The creator of the trust, called the grantor, is usually the initial trustee of the trust. In addition, a well-drafted trust appoints one or more successor trustees to serve in the event the grantor dies, resigns or becomes incompetent due to Alzheimer’s disease, stroke or other illness. Assuming your trust was properly funded (i.e. your property and assets were transferred to the trust), this allows your finances to be managed if you cannot do so yourself.
Probate avoidance, control of distributions and providing for your incapacity: these are the advantages of a revocable living trust. If you are considering estate planning, think about a revocable living trust.