Revocable living trusts are common estate planning tools. When drafted correctly, funded, and updated throughout your life as your circumstances, goals, and wishes change, living trusts can offer many benefits. However, no estate planning tool is right for everyone. Before deciding to use a revocable living trust, it is important to understand both the potential benefits and potential downsides to using them.
1. Reduces the Need for Probate
One of the most misunderstood aspects of estate planning is when someone’s estate or assets are subject to probate court administration in Florida.
People often think that if they create a will, that their assets will automatically pass to their loved ones according to the terms of that document, outside of probate court. The reality is that assets passing through a will are generally subject to probate administration. That means your named personal representative must be appointed by the court and given legal authority to distribute your assets. Probate court can be costly as well as time- and labor intensive.
When your assets are in a revocable living trust, you can give your designated trustee the authority and direction to manage and distribute your real estate, personal property, and financial assets according to the terms you specify — without requiring your trustee to seek court approval.
Because assets passing through a revocable trust are exempt from the probate court process, you can retain more privacy over your legacy than you could with a will.
With the administration of a will, the will itself and the required court filings become public records. That means that anyone, including everyone from distant relatives to nosy neighbors, could access, view, and obtain copies of those documents. The value of your estate, and your wishes about who should inherit under your will, are not private.
In contrast, revocable living trusts are not typically filed with the court, and your trustee is under no legal obligation to provide copies of the document or disclose the value of trust assets to anyone who is not a beneficiary of the trust. When you use a revocable living trust, you retain privacy over your financial picture even after your death, something that isn’t an option when you rely on a will as your primary estate planning tool.
3. Control and Direct Assets
Whether you create a will or a trust, you name someone who is in charge of managing and distributing your assets. One important difference though is how assets are distributed. With a basic will, the assets passing through your estate are distributed outright to your named beneficiaries as part of the probate process.
With a revocable living trust, you can exert a measure of control over your assets from beyond the grave, directing your trustee on when and how your beneficiaries will be able to inherit. For example, if you are leaving assets to a minor child, or to an adult child who simply is not good with money, you can use a revocable living trust to structure distributions for that child. You could give your trustee authority to use assets for your child’s health, education, maintenance and support but only provide for lump-sum distributions when the child attains certain ages. Or, you could leave all distributions of trust principal or income to your trustee’s discretion.
Revocable living trusts can also be used to control how remaining trust assets should pass at your primary beneficiary’s death. You may not want assets to pass to your child’s spouse or partner at your child’s death. With a will, your child inherits after your death and you don’t have any say about what happens after that. Using a trust, however, you can specify who will benefit from your legacy — even long after the primary beneficiary dies.
4. Incapacity Planning
Nobody likes to think about becoming incapacitated, but the reality is that none of us knows what the future holds. Using a revocable living trust can provide you with the peace of mind that comes from knowing you can make the process of managing your affairs as easy as possible on your loved ones if you were to become unable to make your own decisions.
Without planning for future incapacity, your loved ones could be required to go through the court system to obtain a legal guardianship in order to access your assets, pay your bills, and interact with and obtain information from your financial services providers.
With a revocable living trust, you can serve as the trustee during your lifetime but you can specify that your named successor will assume control in the event of your incapacity, and at your death. This means that your successor trustee should have seamless access to your accounts, no matter what the future holds.
Is it Time to Create or Update Your Estate Planning Documents?
When you are ready to formalize your wishes, an experienced estate planning attorney can help you evaluate options and implement an estate plan that makes sense for you, based on your financial holdings and goals.
To learn more about revocable living trusts and to schedule an appointment, contact The Judy-Ann Smith Law Firm in Jacksonville today at (904) 733-9080, or contact us online.