A Revocable Living Trust and You

admin_GabrielImage, News

The revocable living trust is the foundation of our estate planning practice at Katzner Law Group.  As happy as we are to see the widespread shift away from wills to revocable living trusts we also appreciate that there are some circumstances where they may not be required. Let’s discuss the advantages of a revocable living trust as well as when someone may not need one.

The benefits of a revocable living trust

A revocable living trust offers several important benefits compared to a will:

  1. A revocable living trust provides privacy. A will is administered through the court process known as probate. Probate is an entirely public process. Every piece of paper filed in probate is a matter of public record. Predators and scam artists use this information to take advantage of your family when they are at their most vulnerable. On the other hand a revocable living trust is private. It is administered in the privacy of a lawyer’s office and only the trustee and beneficiaries are aware of what it contains. The value of privacy cannot be overstated in today’s world.
  2. A revocable living trust provides for your care, and the safeguarding of your assets, during incapacity. A will is a document that only become effective upon your death. It is useless should you become incapacitated. A revocable living trust is a document that is in effect from the moment you sign it. In the trust you will have stated your wishes for both medical care as well as who you want to manage your finances while you are incapacitated. You can also provide specific instructions as to what should, and should not, be done with your money while you are incapacitated. This is more far-reaching document that better accomplishes your goals than a simple Power of Attorney.
  3. A revocable living trust avoids the time and expense of probate. New York is a relatively “probate friendly” state. But that’s not saying much. Probate in New York takes on average 9-18 months and costs 3-8% of the gross value of your estate. This is a huge waste of time as well as money that would otherwise go to your loved ones. Forcing your loved ones to go through probate is a choice, one that can be avoided by using a more sophisticated estate planning vehicle than a will.

When a will may be good enough

The benefits of a revocable living trust are clear but there may be instances when a simple will can suffice:

  1. You have less than $30,000 in total assets. Probate is not required if you have less than $30,000 in total assets.
  2. You have a small estate (under $250,000), your only heir is your spouse and you wish to leave everything to him or her. In this instance you could use joint ownership, Payable on Death accounts, and a few other estate planning vehicles to leave everything to your spouse in a way that avoids probate. These methods are not to be used in a remarriage situation or anytime you have children. They expose your family to too much risk.

When you require more than a revocable living trust

Our clients with larger estates, or other concerns such as a remarriage situation, spendthrift or special needs child, or long-term care needs, may need an irrevocable living trust to accomplish their estate planning goals. Irrevocable living trusts are beyond the scope of this article but they are a powerful estate planning method that deserves mention. By putting assets into an irrevocable trust during life you can avoid estate tax, protect those assets from creditors, allow a special needs child to obtain government benefits, among other things.

So what’s right for you?

Some attorneys say “if you don’t use a revocable living trust you’re failing your family” while others, typically older attorneys, say “a will has been around forever why wouldn’t it be good enough for you?” We fall somewhere in the middle. The overwhelming majority of our clients are professionals and those with estates that exceed the $30,000 probate exclusion. We suggest the use of a revocable living trust for them.  But there is no one approach that is better than the other in and of itself. It depends on the facts and circumstances applicable to you as well as your estate planning concerns and goals.

Rather than worrying “do I need a will or do I need a revocable living trust” you should be commended for being concerned about what’s best for your family.  Having a written estate plan is paramount to caring for your family. When we sit down for a Family Wealth Planning Session we can determine together whether a will or revocable living trust is right for you. We typically charge $750 for a Family Wealth Planning Session but mention this article and we will waive the fee.  You can reach us through the website or by phone at (646) 736-7539.