5 Reasons to Have and Not Have a Revocable (Living) Trust?

5 Reasons to Have and Not Have a Revocable (Living) Trust?

Reasons to Use a Revocable Trust for Estate Planning

1) Avoiding Probate:
One of the primary reasons to use a revocable trust is to avoid the probate process. Assets in a revocable trust pass directly to the beneficiaries without going through the public probate court, allowing for quicker distribution.

2) Maintaining Privacy:
Unlike wills, which are public record once they go through probate, a revocable trust remains private. This means the details of your estate and the distribution of your assets are not made public.

3) Incapacity Planning:
A revocable trust can include provisions for managing the grantor's assets if they become incapacitated. This ensures that a designated trustee can step in to manage the trust assets without the need for court-appointed guardianship.

4) Control Over Asset Distribution:
A revocable trust allows the grantor to specify detailed instructions on how and when assets are distributed to beneficiaries. For example, the grantor can stipulate that assets be distributed over time or upon certain conditions, such as a beneficiary reaching a certain age.

5) Continuity and Management of Assets:
In the event of the grantor’s death or incapacity, a revocable trust ensures seamless management of assets. The named successor trustee can immediately take over without the delays or complications that might arise with a will or probate process.

Reasons Not to Use a Revocable Trust for Estate Planning

1) Costs:
Setting up a revocable trust can be more expensive than simply drafting a will. There are legal fees involved in creating the trust, transferring assets into it, and potentially higher ongoing maintenance costs compared to a will.

2) No Tax Benefits:
Unlike some other estate planning tools, a revocable trust does not provide any immediate tax benefits. It does not reduce estate taxes or income taxes for the grantor, as the trust assets are still considered part of the grantor's estate.

3) Complexity:
Managing a revocable trust can be more complex than handling a simple will. The grantor needs to ensure that all relevant assets are properly transferred into the trust, which can require ongoing attention and administrative work.

4) Not a Creditor Shield:
A revocable trust does not protect assets from creditors during the grantor's lifetime. Because the grantor retains control over the assets, they are still considered part of the grantor's estate and can be accessed by creditors.

5) Ongoing Administrative Burden:
Once established, a revocable trust requires ongoing management, including the tracking of assets, potentially retitling properties, and keeping the trust documents up to date. This can be more burdensome than managing a will, which is typically only revisited upon significant life events.

Consult an estate attorney regarding your situation.

-Your Friends at Red Oak Financial Group