Are Revocable Living Trusts for You? Basic Information
Worried about probate? Concerned your heirs will receive their inheritance on a timely basis?
A revocable living trust is a legal device that can help protect assets. Revocable living trusts are promoted as an alternative to probate. They can be used to manage your property during your lifetime and to distribute your wealth quickly after your death. Any competent adult can establish a revocable living trust.
• How is the Trust established?
A revocable living trust is established by a written agreement or declaration of trust which appoints a “trustee” to administer the property legally transferred to the trust. It gives detailed instructions on how property is to be managed and distributed upon death.
• What Assets Can Be Included in the Trust?
Assets can include property, deeds, stock, bank accounts, life insurance, and certain pension accounts. Assets not formally transferred to the trust might still be subject to probate.
• How About Trustees?
With a revocable living trust, more than one trustee can be appointed. Each trustee can be delegated different duties.
• What are the Advantages of a Revocable Living Trust?
There are many advantages of a revocable living trust. Avoiding probate is one of the most significant and valuable features of a revocable living trust.
• What are the Negatives of a Revocable Living Trust?
A revocable living trust may have some drawbacks. Revocable living trusts can be expensive and can not always eliminate the need for attorneys and accountants. They are usually longer and sometimes more complicated to draft than a will. The exact cost of a revocable living trust depends on how complicated your assets and your estate planning goals are. It is a smart idea to compare estimates of how much a revocable living trust will cost to draft, how much writing a will would cost, and how much probating your estate would cost. You should also consider any fees you might want to pay the trustee.
Revocable living trusts also can require attention and management for an indefinite period.
There is also an element of inconvenience to a revocable living trust. Once the trust is established, trust books must be maintained to ensure that all assets continue to be registered to the trustee.
There can also be unforeseen problems. A revocable living trust can raise a variety of new issues regarding title insurance coverage, real estate in other countries, Subchapter S stock, certain pension distributions, and other items.
A revocable living trust is not a good idea to save taxes. By itself, a revocable living trust does not avoid income, estate, or gift taxes. Provisions for saving estate and gift taxes can be included in both a revocable living trust or in a will.
Even if your assets are held in a trust, a state estate tax return must be filed after you die if your property exceeds $1,000,000 in value for the year 2006 and beyond, and a federal estate tax return must be filed after you die if your property exceeds $2,000,000 in value for the year 2006 and 2007.
Given this information, you must decide if a revocable living trust is right for you.