One of the biggest misconceptions about Revocable Living Trusts is that they are only for the wealthy. However, even if you have only accumulated a moderate amount of wealth or assets, having a trust might be a useful tool to consider for your estate plan.
Probate is the court-supervised process of settling an estate after someone dies. It is a time-consuming process and can sometimes end up being costly. Additionally, it is completely public – anyone can see the distributions made and who they are made to.
A Revocable Living Trust, however, allows for greater privacy since any assets that were titled in the name of your trust during your lifetime will generally avoid the probate process and will not become part of the public record. At the same time, a Revocable Living Trust can be altered, revoked, or amended any time during the lifetime of the person who created it – without the consent of the trustee or others – allowing privacy at death and flexibility during life.
While it is important to fund the trust by adding your assets to it, it is also important to have a will that will work in conjunction with the trust. A carefully drafted will can allow for assets that were not in the trust at the time of your death to “pour over” into the trust during the probate process.
Revocable Living Trusts are useful tools, but it’s important to keep in mind that they are not a magic solution to all of your problems. Without further planning, most Revocable Living Trusts cannot help you avoid income taxes, avoid estate taxes, shield assets from your creditors, or help you qualify for Medicaid. While options may be available such as a credit shelter trust to reduce the amount of estate taxes due for some people or a spendthrift trust to prevent a creditor from accessing some assets, these are issues that would need to be carefully addressed on a case-by-case basis.
Whether or not to create a Revocable Living Trust will vary from person to person based on their needs and estate planning goals. If you would like to talk about whether one will be beneficial to you, we recommend talking with an attorney or tax advisor. As always, don't hesitate to contact us if this is something you would like to discuss.