Why You Need It!
About a week ago a colleague of mine asked for an article to give to his clients explaining why they should come to me and set up an estate plan. With the very appreciated help of my assistant we came up with the following:
Why Do You Need a Revocable Living Trust?
What is a Trust?
With regard to estate planning, a Trust refers to assets placed by the Trustor (Settlor or Grantor), into a Trust to be managed by one or more Trustees, for the benefit of another (beneficiary or beneficiaries.)
Many people do not worry about what will happen to their assets after their death or if they become incapacitated. Some may have written a will but there may be situations when your circumstances are too complicated to be handled by a will alone.
In order to secure the best outcome for you and your loved ones, the answer could be to set up a Revocable/Living Trust (RLT). The RLT is a document that dictates how your business will be conducted upon your death (or incapacitation). It usually contains your major assets (home, savings and investment accounts, etc.) As the Trustor, you transfer title to these assets from your name to the Trust. You assign yourself as Trustee and then a list of alternate Trustees to succeed you and manage the Trust in case you can’t. There are various advantages and a few disadvantages to an RLT. This document aims to give you more information about both.
Advantages
* Avoid probate. Unless a trust has been established before you die or become incapacitated, your assets could possibly only be transferred to the beneficiaries through probate court. This is a costly and usually lengthy process (see probate fee chart below).
* Your assets will be managed upon incapacity. This allows you to avoid a guardianship proceeding, in case you become incapacitated and unable to manage your assets.
* You can specify the medical care you would like, down to which nursing facility you would like, and whether you would like to be resuscitated and put upon life support, etc.
* Because probate is avoided, the time taken to administer and distribute the estate is reduced.
* Because the RLT simplifies the process for the beneficiaries, it can reduce the stress for beneficiaries associated with a messy and long after-death administration.
* The privacy of an RLT, compared to a will which is public information, increases the likelihood that your desires will be accomplished, and decreases the possibilities of fights over the estate.
* The ability to change RLT provisions is useful if you see that the RLT is not working as you would like. The RLT is more flexible than a normal testamentary trust which necessitates the re-writing of the will also.
* The RLT can utilize federal state tax exemptions allowed for the husband and wife, thus maximizing your unified credit.
* The RLT is valid in every state.
Disadvantages of an RLT
* Initial cost of setting up the RLT. It is advisable to consult an attorney to review your trust documents even if you decide to create the Trust yourself.
* Setting up the RLT takes more time that a will.
* A RLT does not provide protection from creditors, although other types of trusts do.
Summary
As you can see, the advantages clearly outweigh the few disadvantages of establishing an RLT, especially if you have a large estate with varied assets, the distribution of which could be contested by your heirs in a long, expensive, complicated probate procedure.
APPROXIMATE GROSS ESTATE SIZE = ORDINARY PROBATE FEE
$100,000.00 = $4,000.00
$200,000.00 = $7,000.00
$500,000.00 = $13,000.00
$800,000.00 = $19,000.00
$1,000,000.00 = $23,000.00
$2,000,000.00 = $33,000.00
$3,000,000.00 = $43,000.00
