People sometimes make assumptions without knowing all the facts. There are those who do not consider the creation of a revocable living trust because they are under the impression that all trusts are only useful for very wealthy individuals.
There are trusts that benefit high net worth families that are exposed to estate taxes on the federal and/or state levels. However, these would typically be irrevocable trusts. Revocable living trusts are actually useful for a wide range of people who do not consider themselves to be wealthy.
One of the major benefits that you gain when you create a revocable living trust is the avoidance of the legal process of probate. When you use a last will to state your final wishes regarding the transfer of property that is in your possession at the time of your death, the will must be admitted to probate.
Probate provides certain protections, but there are some inherent drawbacks. One of them is the time factor. The heirs to the estate that are named in the last will do not receive their inheritances until the estate has been probated and closed by the court.
The exact duration of the probate process will vary depending on the jurisdiction and the complexity of the case in question. Generally speaking, a relatively straightforward case will pass through probate in about a year in most areas.
In addition to the time consumption, probate can also be expensive. There are court costs, legal fees, accounting expenses, the executor’s remuneration, and other costs that can accumulate. This is another one of the drawbacks.
When you arrange for the transfer of your monetary assets through the creation of a revocable living trust rather than a last will, the trustee that you name will distribute assets to the beneficiaries outside of the process of probate. The time lag will not exist, and there will be no probate costs.
It should be noted that you should have a will called a pour over will if you create a revocable living trust. The pour over will directs any assets that you may have had in your personal possession at the time of your death into the trust.
A revocable living trust is also valuable as an incapacity planning device. Many seniors ultimately become unable to handle their own affairs. It is not the only cause of incapacitation, but Alzheimer’s disease strikes around 45 percent of people who are 85 years of age and older.
When you create a revocable living trust you can include the nomination of a successor or disability trustee. This individual or entity would be empowered to administer the trust in the event of your incapacitation.