A “revocable living trust” sounds very official, and even a bit confusing. What is it? Why have one? What is all of the “hype” by such financial celebrities as Suze Orman? Even official consumer organizations like “Consumer Reports” have gotten in on the action and are very “pro-RLT”. So, what is the deal with these documents.
Essentially, they are a “must have” for those worried about such issues as incapacitation while alive, the impact of probate when dead, and the hassles of dealing with assets while living or dead. Clearly, those are substantial matters, and so it pays to understand just what the RLT is, and why a group like Consumer Reports so strongly advocates it.
The “Low Down” on RLTs
So, the revocable living trust is a document that can, obviously, be “revoked” or changed by the “grantor” according to their needs. It is not the same as a will because it addresses more than just what is done with your assets upon your death. Though it does play a role in your estate at such a time, it is also a document that allows you to have plans in place should you become incapacitated. If you are married, or sharing major assets such as a home, the RLT ensures that things are streamlined and simplified where that asset is concerned.
Consider what Consumer Reports has to say:
“Everyone needs a lawful way to pass assets to their heirs after they’re gone, and either a will or a revocable living trust can do the job… A living trust can also come in handy during your lifetime. Since the trust is revocable, you retain control over the property you place in it and can change its provisions and even serve as trustee. If you become ill, your successor trustee can manage the assets.” (Consumer Reports, 2011)
Did you just have an “aha!” moment? If you realized that the revocable trust is a vehicle that allows you to keep probate courts out of your familys life, you are right. In fact, you can eliminate the need for probate altogether if you create an RLT properly. You can also prevent disputes over an estate and keep your personal business “private” after your death.
However, this is only true if you set up the trust properly, fund it, create a durable power of attorney, and make things simple. This is why an attorney specializing in estate planning should guide you through setting up the trust.
Interestingly enough, this is why some say that the revocable living trust is an ideal tool for those without a lot of money or assets. As an example,
“…the less money you have, in my opinion, the more you need a living revocable trust, because where does a person who doesn’t have a lot of money come up with the money to pay for court costs, probate fees, executor costs, lawyer costs? Where do they get that? They don’t have it.” (Orman, 2007)
Here too, Consumer Reports is in agreement. They explain that survivors can often end up with a lot more money thanks to the living trust. Without the need to file for probate, pay the fees associated with the process, and hire a probate attorney, a huge amount of money can stay in the hands of the survivors and heirs.
The benefits of revocable living trusts are that they:
- Give a legal way to pass assets to heirs;
- Avoid probate;
- Save time and money;
- Allow a trustee to quickly distribute assets, and
- Are handy while you are alive because they provide a legal way for the trustee to manage assets.
The key is to set them up completely and properly, and to use a legal expert to ensure you have “dotted Is and crossed Ts”.
- Consumer Reports. Living Trusts Save Estate Time and Money. Consumer Reports. 2011.
- Orman, Suze. Why you need a revocable living trust. Bankrate.com. 2007.