Are Living Trusts Necessary?
It’s common these days for us to get some push back from clients whenever we recommend Revocable Living Trusts (RLT). The resistance stems from the perception that many people have that RLTs are only good as tax-planning tools.
With the federal estate tax exemption currently set at $5.49 million per individual and just shy of $11 million per married couple, and the gift exclusion at $14,000 per person, some would argue that the need for estate tax planning for everyone but the extremely wealthy is pretty much done.
We disagree. There are significant benefits to an RLT beyond tax protection. Even if President Donald Trump manages to keep his campaign pledge to get Congress to eliminate the federal estate tax, a trust is still the best cost-saving investment you can make in creating your own estate plan.
With a properly drafted RLT, you can not only control who inherits your assets, but how those assets are disbursed and under what circumstances.
The trust grantor (you) can set up rules or stipulations in the trust that must be met before assets are inherited by beneficiaries. The trustee, chosen by you, manages those assets per your wishes.
A simple will, properly drafted, is essentially no more than a letter to a probate court. It informs the judge of a decedent’s wishes about what he or she wanted done with personal property and other assets, but the court can rule differently.
Documents filed in a probate case and court hearings are public record, meaning that if all you had was a will, then your personal worth and any records of family infighting over the estate could make the headlines. An RLT is executed outside of a probate court’s venue, keeping the entire matter private and out of public view.
After death, the RLT continues to offer protection to your heirs. If titled in the name of the trust, assets are shielded from a beneficiaries’ creditors, lawsuits and divorce settlements. It also helps protect your children from “accidental” disinheritance when a surviving spouse remarries.
Probate administration can last many months to several years, depending on the size and complexity of an estate. On the other hand, an RLT can dramatically reduce the wait time for an estate to be settled, allowing beneficiaries to move forward with their lives much sooner and receive the assets you wanted them to enjoy and benefit from.
Revocable Living Trusts are fantastic tools. If you are interested in learning more about whether an RLT should be part of your plan, we would be delighted to explain how it can work for you.
We hope this information was useful to you and helps you and your family. If you have any questions, don’t hesitate to call our office at 1-800-835-2634. You can also email us at firstname.lastname@example.org.