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Revocable Living Trusts are Not Just for the Rich

Posted by Jerry Clinch | Dec 22, 2021 | 0 Comments

Whether a Revocable Living Trust makes sense in an Estate Plan depends on whether the benefits of the Trust outweigh the up-front cost and effort to establish and properly fund the Trust. While there are a number of reasons for the rich and famous to incorporate Revocable Living Trusts into their Estate Plans, there are also a number of benefits for the average American citizen to consider setting up a Revocable Living Trust even when tax planning is not a concern. In determining whether a Revocable Living Trust is right for your particular situation, give the following factors consideration.

Incapacity/Disability Planning

If a Revocable Living Trust is properly funded during the trust creator's lifetime, management of the trust assets falls to a successor trustee during any period of the Settlor's incapacity or disability. A successor trustee may also have an easier time managing assets than an individual appointed as an agent under a Durable Power of Attorney.

Probate Avoidance

Assets passing under a Last Will and Testament or by intestacy (dying without a Will) are subject to the Probate process. Probate, in a nutshell, is the judicial means to give effect to a Last Will and Testament and re-title assets, as well as the means for a court approved Personal Representative to pay the debts, taxes, and expenses of an Estate, and to distribute assets to beneficiaries.

In Nebraska, an Informal Probate is generally not terribly onerous and, absent any issues that may arise, an Informal Probate can be wrapped up as soon as 5 months after the Probate case is filed, and the cost of hiring an attorney should be reasonable, but may still cost several thousand dollars even for a simple Probate. As such, Probate avoidance can be a major reason to set up a Revocable Living Trust as a means to avoids the costs associated with a Probate case. 

Assets properly funded into a Revocable Living Trust can normally be distributed to beneficiaries much faster than assets passing through a Probate case, and attorney involvement in settling a Revocable Living Trust should be less costly and burdensome than proceeding with a Probate, if attorney involvement is even needed in the first place.

Avoiding Ancillary Probates

If a person dies (decedent) while owning real property in multiple states, an Ancillary Probate (i.e., Probate in another state in addition to a home state Probate) in the State or States where real property is situated will likely be necessary to transfer title to the decedent's beneficiaries. This situation can be entirely avoided with a properly funded Revocable Living Trust.

Continuing Trusts and Guardianships/Conservatorship

Guardianships and/or Conservatorships of minors' estates are worth avoiding, if possible. Minors cannot own property; if a minor in Nebraska is to receive an inheritance, in the event that the right planning is not in place, a court-monitored Guardianship and/or Conservatorship will be established, requiring the filing of yearly paperwork with the local Court. A trust established under a Revocable Living Trust can be less restrictive, avoid court supervision, and defer payment to the minor past the age of majority.

Maintain Privacy

Probated Wills are filed with the Court in Nebraska and can be accessed by the general public whereas Revocable Living Trusts do not become part of the public record. While privacy concerns may have declined, an individual who wishes to maintain privacy concerning who gets what after they die will benefit from a Revocable Living Trust.

Preserve Mobility

Generally, trust creators (Settlors) may choose the law that will govern their Revocable Living Trust. If a Settlor moves to another State, there should not be a great need to have the Revocable Living Trust revised based solely on the move. Last Will and Testaments, however, are highly state-specific and a Will prepared in Nebraska will not likely be effective should you move to another state, requiring the preparation of a new Last Will and Testament.

Funding Costs

The value of a Revocable Living Trust is not fully realized unless the Trust is properly funded during the Settlor's lifetime (i.e., assets are properly re-titled to your Trust). The more funding that is needed, the more in potential added costs for funding your Trust. It should be noted that funding is not necessarily work that needs to be completed with the assistance of an attorney.

Income Taxes

Revocable Living Trusts are tax-neutral for living Settlors, but this changes once the Settlor dies, resulting in the Trust becoming irrevocable and then gaining a tax existence independent of the Settlor. However, this can be addressed by making an election that allows the Trust to be treated as part of the decedent's estate for 2 years from the decedent's date of death, or 6 months from the final determination of federal Estate Tax Liability.

Take steps to give yourself, and your family, Peace of Mind today by ensuring that your Estate Plan will do exactly what you want it to do. Contact Clinch Law Firm, LLC to schedule a free consultation at our York, Nebraska office, or feel free to schedule a complimentary 30-minute telephone consultation or a 60-minute in-person consultation for a time that works for you here: Appointment Scheduler. Virtual appointments are also available, upon request.

About the Author

Jerry Clinch

Jerry has extensive trial experience and knowledge regarding estate planning, probate, asset protection, business law and business formations.  You can reach Jerry at [email protected] 

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