Creating revocable living trusts can seem like an intense, complicated process. They also come with a stigma as being only for the wealthy or unnecessary if a will is already in place. However, while revocable living trusts might not be for everyone, they can be a great estate-planning tool.
If you are unsure about the advantages of creating a revocable living trust, consider the pros and cons below.
Working with revocable living trusts means that you are able to avoid probate. This is a big advantage as probate court can bring with it some fairly restrictive rules for both your family and your property.
Considering revocable living trusts can be an even higher priority for those who own real estate in multiple states. This is because each property will have to be probated where it is located. As a result, it can place an onus on your family, as they will then be faced with multiple probate proceedings.
Another benefit to revocable living trusts is that they can provide almost immediate access to cash in a difficult time. This access stands in stark comparison to the probate process which is much lengthier to proceed through.
A misconception about revocable living trusts is that they solely revolve around death. This is not the case. Revocable living trusts can also address certain issues while you are living, as well.
In the event of your becoming incapacitated, your family and property will default to the restrictive rules of guardianship or conservatorship. But when creating a revocable living trust, you name a successor trustee. This role involves stepping in and managing the trust in your place should a situation arises that leaves you no longer able to carry out yourself.
Part of this process includes outlining the provisions that determine your incapacity. And it is only after following the trust’s provisions that your successor trustee can take control of your trust assets without the interference of the court.
The unfolding of the probate process is public. As a result, anyone can go to the courthouse to review the documents that are filed there. This includes your will. In fact, there are even some areas where the curious can even look up court dockets and filings online.
This means that when probate is opened – and your will is placed with the court – the information contained within can be accessed. Information about what you owned and left to others is able to be found.
However, trust documents are never filed with a court. With that being the case, they do not become a part of the public record, maintaining your privacy.
The process for creating revocable living trusts typically cost more than simply creating a will. Even with the trust formed, new deeds and other documents have to be created in order to transfer ownership of your assets into it.
However, in the long run, the time and money involved tends to be less. Since the deeds and documents transferring ownership must still be created after a death, you are essentially paying these costs in advance.
Funding revocable living trusts is maybe the biggest drawback given the amount of work required. Doing so means contacting and changing all of your financial information, reissuing stock certificates, retitling cars, and so on. Again, all of this work to make a revocable living trust the primary estate planning tool is not an overnight update.
A partially funded trust can cause big headaches down the road. In situations like this, you will need a “pour-over will” which catches your unfunded assets and “pours” them into your trust. And this means that the pour-over will must also be probated.
While it does serve as an extra step in the process, taking the time to create a pour-over will can be an incredibly important tool to have if needed.
Creating revocable living trusts can be a great tool when it comes to estate planning. While it is not for everyone, it is worth taking the time and effort to see how you and yours can benefit from planning ahead.