703.938.3510 Contact Us

How Does a Revocable Living Trust Work – A Short Case Study

We have discussed revocable living trusts and their benefits in previous blogs. In this blog, we’ve created a case study to illustrate the value of both estate planning and a revocable living trust, and how it is used once the grantors age, become incapacitated, or die.

Meet Bob and Jane.  They have been married for well over 40 years and are now in their 70s.  They still live in their own home, which they own outright, and have many possessions they’ve accumulated over the years (furniture, jewelry, artwork, etc.)  They also own a vacation condo in Ocean City, Maryland.  They also have bank accounts, retirement accounts, a whole life insurance policy and a few stocks and bonds in their investment portfolio.  They both receive monthly Social Security benefits, and Bob also receives pension benefits now that he’s retired.  Their estate does not exceed the Federal Estate Tax Exemption (roughly $22,000,000 in 2018.)

Creating a Revocable Living Trust

Working with an estate planning attorney, Bob and Jane executed a revocable living trust when they were in their late fifties and at that time transferred all of their assets into the trust.  They named themselves as co-trustees so that they both would have control of their assets, and named their son, Michael, as successor trustee after their death or incapacitation to continue to manage their assets and/or disperse them to their beneficiaries.

Their estate planning attorney not only helped them create the living trust, but also  helped them complete their estate plan by drafting an advance medical directive for each of them so that their personal wishes regarding life support and healthcare can be followed.  They also each have a durable power of attorney naming their spouse as agent.

Incapacitation and death

Unfortunately, Bob developed Alzheimer’s disease in his late 60s.  He can no longer take care of himself or make decisions for himself and Jane can no longer take care of him in their home.  Jane, with the help of Bob’s doctor, decided to put Bob in a nearby nursing home.  Because Bob has a healthcare directive, she will not have to go to court to be named his legal guardian and will be able to make decisions about his personal care.  Jane also became the sole trustee of the trust without any court action being required, and can use the trust assets for Bob’s care. Between her authority as power of attorney and as trustee, Jane does not need to petition the court to be Bob’s conservator and she can make financial decisions on his behalf immediately without court proceedings and costs.

Two years later, Jane had a stroke and could no longer take care of Bob’s or her own affairs.  Her son, Michael, becomes successor trustee without having to petition the court for guardianship or conservatorship of either parent, and uses the assets in the trust to take care of both Bob’s and Jane’s needs.

After the death of his parents, Michael took care of their funerals and related expenses, paid all final bills, and filed the appropriate income tax returns.  Within a short time, a month or so, Michael distributed the estate per the terms outlined in the trust documents.  No probate or other legal proceedings were required or necessary, even for the out of state condo in Ocean City, Maryland.

About Northern Virginia Trusts & Estates

Northern Virginia Trusts & Estates provides affordable estate planning services for Virginia families. Our firm understands the intricacies of estate planning and offers a range of services from simple, a la carte pricing for single items to comprehensive offerings that cover a variety of preparations.

For more information about revocable living trusts, estate planning, our services and packages, contact our office today at 703.938.3510 or visit our website: www.NorthernVirginiaTrustsAndEstates.com