A revocable trust is a popular request among estate planning clients. Individuals often request one due to a desire to avoid probate. While a great tool in some circumstances, a revocable trust also has a downside. It is a potentially effective means to ease transfer of assets to beneficiaries but requires more work to set up than a Will and ongoing maintenance throughout one’s lifetime.
Probate is the process by which a Will is given legal effect in order to transfer the deceased person’s assets to the beneficiaries named in the Will. This process includes filing the Will for probate with a court, which makes it a publicly available document, and meeting certain statutory deadlines for notifying beneficiaries, creditors, and preparation of an inventory. The probate process takes time, but may or may not be especially cumbersome depending on circumstances such as assets, the quality of the Will, and the beneficiaries.
A properly funded revocable trust will avoid probate altogether. There are multiple other benefits of a revocable trust. These benefits included the following:
- Simplicity. If set up correctly, a revocable living trust can make transfer of assets to loved ones easier, quicker, and less costly than probating a Will;
- Privacy. The trust document itself stays confidential because there is no filing requirement as there is with a Will. This provides a degree of privacy to your gifts and financial affairs; and
- Management. It’s generally a more seamless way to manage your assets in the event of your incapacity or disability.
With a revocable living trust, you maintain control of your assets as trustee and can revoke or amend the trust whenever you choose. You can also move assets into and out of the trust as you wish.
There are disadvantages to a revocable trust. It requires more work than a Will to establish and, thus, the cost is more than most Wills. For a revocable trust to avoid probate, you must properly fund it. Failure to properly fund a revocable trust may lead to probate anyway. If your goal is for your family to avoid probate, a revocable living trust requires the up front work of correctly titling your assets throughout your life.
At the end of the day, there is no one-sized-fits-all plan for everyone. A revocable trust is not the only method of avoiding probate, if that is your objective. Whether it is right for you is dependent on your circumstances, priorities, and goals.
Questions about estate planning or revocable living trusts? Contact us.
