Is a Revocable Living Trust Right for Me?

Many clients wonder whether or not they should have a revocable living trust or if a will is enough.

A revocable living trust is not for everyone. Any Will lawyer that recommends a living trust every time is not properly evaluating the needs, wishes, and circumstances of a client.

Likewise, many people think that a trust is just for someone with a high net worth.  This is not necessarily the case. The following are some of the situations and questions that should be asked to determine if a revocable living trust is right for you.

1.  Are you concerned about a loss of mental capacity?  A revocable living trust can benefit someone with potential mental capacity issues since it may avoid a costly and complicated court supervised guardianship proceeding.  Ask yourself is there a history of dementia or Alzheimer’s in your family?  Has there been an early diagnosis of a loss of some mental capacity?   If so, you or a family member may benefit from a revocable living trust instead of relying simply on a power of attorney.  A living trust can be more specific regarding your wishes, can provide clear direction regarding the determination of incapacity, and also may provide more direction for the management and disposition of your assets.  By creating and drafting a living trust now, you may save thousands of dollars in the future and also avoid future family conflicts or disharmony.

2.  Do you have minor beneficiaries (children or others under 18)?  A revocable living trust may help preserve and manage assets for minors past the age of 18.  For example, a life insurance policy may fund a revocable living trust and manage assets for the benefit of your children until they reach age 25 or 30 rather than the proceeds from the policy being turned over to the minors when they turn 18.  In addition, a revocable living trust for the benefit of minors may also avoid a costly and complicated court supervised guardianship proceeding for the benefit of a minor.

3.  Do you own real estate outside of North Carolina?  Establishing a revocable living trust and titling any real property outside of North Carolina in the name of that trust may avoid an additional (ancillary) probate proceeding in another state. This may save your estate and beneficiaries thousands of dollars and allow for the quicker disposition or management of the real property located in another state.

4.  Are you concerned about privacy?  Privacy is also a possible benefit from a revocable living trust. In the event you are making numerous or complex specific gifts to individuals or charities, then a revocable living trust will allow you to keep these gifts private.   A Will becomes public record; hence we know what James Gandolfini’s of the ‘Sopranos’ fame Will says.  On the other hand, when is the last time you went to the courthouse to review someone’s Will?  Privacy may or may not be a benefit of a revocable living trust depending on your wishes, concerns, and estate plan.

Another important point to consider is the type of assets that you have and how they are titled.  Specifically, any assets (such as life insurance policies, 401K plans, or IRAs) that already have named beneficiaries will avoid probate.  Similarly, joint accounts with the right of survivorship, payable on death accounts, or real estate that is owned jointly with a spouse will usually automatically pass to the surviving account holder, named beneficiary, or surviving spouse.  Simply stated, property or assets  passing to a surviving spouse is usually straightforward; however, if there are minor beneficiaries who are named as joint account holders or beneficiaries, then a revocable living trust might be appropriate for the reasons stated above (management and control of assets or the benefit of your children beyond the age of 18).

Please note that a revocable living trust must be funded in order to be effective. Your assets must be re-titled in the name of the trust and your beneficiary designations must be updated in order to have these assets controlled by the trust. A qualified attorney may assist you in this process.

To summarize, a revocable living trust may benefit you or it may be unnecessary.  A conversation with a well-qualified Will attorney who can evaluate your specific circumstances and your specific wishes can help you decide if a revocable living trust is right for you.