Why Use a Revocable Living Trust?
You may have heard from friends or relatives that they have a revocable living trust as part of their estate plan. But you thought all you needed was a Will, right? In this week’s blog, we discuss revocable living trusts and how they can be used to help meet your estate planning goals.
There are a number of reasons to use a revocable living trust in your planning. Let’s highlight some of the most common benefits:
- Out of state property. When you pass away, your probate estate will be handled in the state in which you resided. For most of our clients, that is Connecticut. But if you own a vacation home, or any other property outside of your home state, things become a bit more complicated. For example, if you own a timeshare in Florida and a beach house in Rhode Island, your Executor will not only need to handle your estate in Connecticut, but they will also need to open separate estates in Florida and Rhode Island! Each state will collect probate fees, which can be costly, and the process is often lengthy. Conveying property to a trust during your lifetime avoids all of this. Upon your death, the property in your trust, no matter where it is located, will be distributed by your Trustee without having to go through probate in any state.
- Privacy. Most probate filings are made public record. By using a trust, you will keep your probate estate private. Only your trusted inner circle will know what was in your trust and what was distributed to your beneficiaries. This privacy is not only reassuring, it can also help to reduce the likelihood of any potential challenges from any disinherited beneficiaries.
- Creditor protection. Many folks believe that the best way to give property to their beneficiaries is to add the beneficiary’s name to a deed or bank account. This strategy isn’t without risk. Once you add your loved one to your deed or bank account, your property becomes theirs. That means, their creditors could look to your property to satisfy a debt or obligation. Imagine your beneficiary gets into a car accident and the other driver sues. Your home could be subject to a lien! A trust can provide creditor protection so that your property remains safe during your lifetime.
- Estate taxes. For married couples with larger estates, revocable living trusts with tax provisions can be used to minimize or even eliminate any estate taxes that may need to be paid upon your death. These trusts have the ability to create other subtrusts as “buckets” for your Trustee. Your surviving spouse and your Trustee will have the ability to use whichever buckets will result in the lowest (or no) tax bill.
- Preserving Inheritance. Almost everyone has a family member or friend that would be affected by “sudden money syndrome” upon receiving an inheritance—in other words, a person who can spend funds almost as quickly as they receive them. By using a trust, you can include special language limiting the beneficiary’s access to his/her inheritance. For example, instead of leaving your son $100,000, you can direct your Trustee to give your son $2,000 a month. A trust can thus allow you to leave an inheritance to thrifty spenders, knowing that the funds will last as long as the trust directs.
Whether your attorney at Disability Planning Partners recommends a revocable living trust for your estate plan will depend on your personal assets and planning goals. Make an appointment today to learn how a trust can help you plan for your future.