Pros and Cons of Living Revocable TrustsFebruary 15, 2016
A living revocable trust is a helpful estate planning tool and offers many benefits over a will, including advantages for those that become incapacitated.
The two most popular estate planning tools are undeniably wills and living trusts, but what makes these two different? As mentioned in our past blog, “Do I Need a Living Trust?” one of the main advantages to a living revocable trust is that in the agreement, you are able to name a successor trustee to take over your affairs in the event that you become mentally or physically disabled, not solely when you pass away.
How do I set up a living trust?
Check out our recent blog, “Estate Planning Tools: Living Revocable Trusts” to refresh your memory on what exactly these estate planning tools offer and how you can go about setting one up.
Benefits for incapacitated individuals
There are several benefits to living revocable trusts, some of which are not available under traditional wills. The main reason people choose to set up a living trust is to avoid the stress and expense of probate, the process by which a court legally transfers assets to beneficiaries and makes sure any outstanding debts are handled. In addition to this, these trusts offer opportunities for those whose health has been jeopardized to the point where they can no longer handle their estate. With a living trust,
- You have a written document that your designated trustee can simply take over in the event that you become incapacitated.
- You will avoid a conservatorship, where someone appointed by court takes over your financial affairs or personal estate.
- You can set up a joint trust with your spouse
- If you recover from incapacitation, you resume control over your affairs.
- You can keep the process completely private.
Without a living trust, a court decides on who gains control of your estate, which might leave you in the care of someone you were not planning to involve in your estate plan.
To refresh your memory, there are some disadvantages in choosing to set up a living trust. This includes:
- The cost to prepare and fund the trust- It is relatively expensive to set up a living revocable trust (around $1,000 usually).
- Complex paperwork- There is a lot of paperwork associated with setting up a living trust, which, depending on how many properties you have to transfer to the trust, can be very time consuming.
- They require maintenance- Living trusts require updating as life circumstances change and your desired beneficiaries change, which can be a hassle to adjust if things change frequently.
- Any assets not transferred by your living trust will be transferred in an order determined by state law.
Despite these disadvantages, if your health or your spouse’s health is at risk, it is smart to set up a living revocable trust. You will want to consider your age and risk of illness in your decision process as well.
Contact us for advice on whether or not you should set up a living revocable trust.