Skip Probate & Save! The Benefits of a Revocable Living Trust

Imagine a handy tool that lets you call the shots on your money and belongings, even after you’re gone. That’s the magic of a Revocable Living Trust (RLT). Think of a Revocable Living Trust  as a container that holds your stuff – bank accounts, investments, real estate, you name it. The best part? You can change your mind about what’s in there anytime, or even take things back if you need them. 

In this guide, the attorneys at The Chamberlain Law Firm will educate you on the role and importance of Revocable Living Trusts. Further, we will discuss how a skilled attorney can help throughout your estate planning journey.

RLTs  also keep your affairs out of probate court. Probate is the legal process of sorting out your stuff after you pass away. It can be slow, expensive, and all the details become public record. Think waiting months, and attorney fees eating into your inheritance for your loved ones. That’s where Revocable Living Trusts come in as the heroes of your estate plan. An RLT skips probate court altogether, saving your family time, money, and a whole lot of stress.

Why Choose a Revocable Living Trust?

Revocable Living Trusts offer a treasure trove of benefits for you and your loved ones. Some of the most common benefits include

• Privacy: RLTs keep your financial details out of public court records.
• Tax Advantages: RLTs can help minimize estate taxes (consult with an attorney for specifics).
• Flexibility is Key: RLTs permit you to change your mind about beneficiaries, successor Trustees, or the trust itself at any time.
• Lifelong Care: Your RLT looks after your assets whether you’re healthy, incapacitated, or gone.
• Faster & Cheaper: Skip probate court and save your family time and money.
• Assets Get Moving: Beneficiaries receive their inheritance quicker with an RLT than through the traditional probate process.
• Protecting Your Legacy: Disinherit someone who contests your wishes with a properly designed RLT.
• Responsible Spending for Heirs: Use a spendthrift clause to guide how your money is used by beneficiaries, especially minor children.
• Successor in Charge: Appoint a trusted person to manage your affairs if you become unable to.
• Family First: Provide for each family member’s specific needs with your RLT.
• Teaching by Example: Use a special needs trust to guide responsible money management for future generations.
• Multi-State Magic: Avoid multiple probates if you own property in different states.

RLTs: Not Quite Perfect, But Still Pretty Great

While Revocable Living Trusts offer a ton of benefits, there are a few potential considerations to keep in mind. When considering a RLT, it is always advisable to speak with knowledgeable estate planning counsel. However, some of the most common drawbacks to RLTs are:

• Time Investment: Setting up an RLT takes some upfront effort.
• Simple Will vs. RLT: For small estates, a will might be a simpler, cheaper option.
• Ownership Shuffle: Assets in the trust are technically owned by the trust, not you. This can complicate the equity and financing of these assets. 
• Tax Time: You’ll still pay taxes on income generated by assets in the trust, which come at a higher rate than your personal tax rate.
• Not a Fortress: RLTs generally do not protect assets from creditors or lawsuits.
• Pro Cost: Legal assistance is needed to create a trust, and it can vary in price depending on your location and assets.
• Keeping Tabs: Monitoring and updating your RLT may be needed yearly. Successor Trustees may also be required to prepare annual accountings. Managing the trust might also involve investment advisor and trustee fees (especially with a professional trustee).
• Life Changes: Adjusting your RLT for life events (like a child’s birth) might require legal fees.
• Retitling the Deed: Transferring property ownership to the trust can involve time and fees.

Getting Started with Your Revocable Living Trust: A Step-by-Step Guide

Ready to put a Revocable Living Trust into action? Here’s a roadmap to get you started:

1. Choose Your Captain: Appoint a trusted person (or even a bank or trust company) as your trustee in a written agreement. This person will manage your assets according to your wishes, and can serve throughout your lifetime. 
2. Fill the Treasure Chest: Transfer your assets, like investments, bank accounts, and real estate, into the trust. There’s no need for a new tax ID number for the trust itself.
3. Skip a Few Stops: Life insurance and retirement accounts with named beneficiaries typically bypass probate already. The same goes for accounts set up as POD (payable on death) or “in trust for” (totten trust) accounts.

Bonus Perks: Unlike wills, RLTs don’t require court approval, and your assets can be distributed directly to your heirs without court intervention. That saves time and money for everyone involved!

Revocable vs. Irrevocable Trusts: What’s the Difference?

While Revocable Living Trusts offer flexibility, you might be wondering about Irrevocable Trusts. Here’s the key difference:

• Revocable Living Trust: You can modify or revoke your RLT anytime during your lifetime.
• Irrevocable Trust: This is a more permanent option. Once assets are placed in an Irrevocable Trust, you generally cannot take them back or make changes without the consent of all the beneficiaries (and possibly even a court order).

Irrevocable Trusts can be useful for specific situations, like asset protection or reducing estate taxes. However, they require more planning and come with less flexibility. Consulting with an estate planning attorney can help you decide which trust best suits your needs.

Note the Federal Deposit Insurance Corporation (FDIC) regulates deposit insurance for revocable trust accounts under 12 C.F.R. § 330.10. This regulation recognizes two main types of revocable trusts: informal revocable trusts (i.e. POD or Totten Trust accounts) and formal revocable trusts (i.e. living or family trusts). The regulation outlines how these trusts qualify for separate FDIC insurance coverage, potentially increasing the total amount insured compared to individual accounts.

In Conclusion

Revocable Living Trusts (RLTs) offer a powerful and flexible way to manage your assets during your lifetime and beyond. They can help avoid probate court, protect your privacy, and ensure your wishes are followed when it comes to distributing your inheritance.  While there are some considerations and costs involved, RLTs can be a valuable tool for anyone looking to create a smooth and secure legacy for their loved ones.  Remember, consulting with an estate planning attorney is the best course of action to determine if an RLT is the right fit for you.

Contact The Chamberlain Law Firm to speak with experienced estate planning counsel, call us at (201) 273-9763 for a consultation. For more estate planning advice, be sure to check out our Insight Articles.

This article is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a lawyer about the specifics of your case, please contact The Chamberlain Law Firm.