Probate avoidance, flexibility, and more - who wouldn’t want a revocable living trust?
Actually, as wonderful as these benefits are, this estate planning document is not for everyone. It requires a thorough analysis of your goals, assets, and personal situation to determine if the cost of setting up a revocable living trust truly outweighs the benefits.
To help you better understand revocable living trusts, we break down some basic information that you need to know when considering setting one up.
What is a Revocable Living Trust?
The revocable living trust has been a significant estate-planning tool for many years and is the foundation for most estate plans. It provides privacy, while avoiding probate and family in-fighting. It ensures the right money and assets get into the right hands at the right time.
What often attracts individuals to a revocable living trust is the flexibility to change or alter terms at any time.
What are the benefits of a living Trust?
A living trust avoids probate and the pitfalls associated with a will. While it does not provide asset protection, like an irrevocable trust, it is flexible and is the basis of many family estate plans. However, it does require moving assets around and won't work if you don't use it and fund it properly.
Another benefit of a living trust is the privacy and flexibility it provides trustors and their beneficiaries. Living trusts are never filed with a court, therefore they do not become public record.
As mentioned above, living trusts also help avoid probate, which keeps your records out of public proceedings. Additionally, as a revocable living trust, changes can be made at any time during the lifetime of the trustmaker.
Living trusts are also beneficial during life. Without a trust, your assets would be subject to the restrictive rules of guardianship or conservatorship if you were to become disabled or incapacitated. A revocable living trust allows you to name a successor trustee so that someone can manage your trust and assets if you can no longer do it yourself.
Additionally, by naming a professional trustee to manage your property, the wealth that you’ve accumulated can continue to grow for multiple generations and you can put restrictions on the income or withdrawals.
How Much Does a Revocable Living Trust cost?
The national average cost for a living trust for an individual is $1,100 to 1,500 U.S. dollars. These costs do vary from state to state.
When working with an attorney, look to pay upwards of $2,000 to cover fees. According to AttorneyFee, among the factors that go into the cost of an attorney creating a Revocable Living Trust are:
- Number of assets to be retitled
- The complexity of the estate plan
- Purpose of the Trust
- Your tax and financial circumstances
- When and how the assets are to be transferred
- Appointing a person to manage assets for minor children
- Value of your estate
- Provisions of the Trust
If you were to create the living trust online yourself, it costs between $100 to $500. However, it’s important to take into consideration what specific you need for a living trust because most online forms only include the very basic information.
How to Fund a Revocable Living Trust
There are several assets that you can, and should, put into a revocable living trust. However, there are also items you should avoid using to fund living trusts. Reputable estate planning attorneys understand these matters in the states in which they are licensed to practice in. It’s best to reach out to an attorney to discuss your unique situation.
Most individuals choose to create a revocable living trust to avoid probate fees. The more your assets are worth, the more it will cost to probate it. Therefore, it’s smart to put high-dollar, valuable property items in the trust like:
- Real estate property
- Personal stock or bonds
- Valuables such as antiques or family heirlooms
- Valuable collections
- Precious metals
- Business shares/stock
Depending on the type of property being funded, there are three ways you can fund your assets into the trust:
Change the title or ownership – Best for real estate, banks accounts, investments, stocks and bonds. If you’re transferring anything with a deed then you will need an executed deed – this requires witnesses, a notary, and more. Your lawyer can help advise on the steps to follow based on the state in which you live.
Assign ownership rights – Best for valuables such as antiques and jewelry, copyrights, and business shares. For this you will need to adequately describe the property and transfer with an assignment of ownership document.
Change beneficiaries – Best for retirement accounts, life insurance policies, and HSAs/MSAs. For these types you will need to change beneficiaries and/or transfer titles.
The funding process for a living trust is not difficult, but it is time-consuming. There are several steps that can be handled online, by mail, or telephone, but there are some financial institutions that require proof of trust and identity. If this is the case, an attorney will prepare a certificate of trust that identifies trustees and explains the powers given – it does not reveal information about your assets or beneficiaries.
Should You Set Up a Revocable Living Trust?
Anyone with assets that are titled solely to themselves that wants to leave those assets to family or friends if they become incapacitated or pass away, should have a revocable living trust.
Regardless of your net worth, a revocable living trust protects you and your family from mental and financial stress.
It’s important to note that not all revocable living trusts are created equal. Working with an experienced estate planning attorney will ensure that your living trust is well-drafted and contains provisions for determining your mental capacity outside of court proceedings, as well as how to take care of you and your assets if you were to become incapacitated. Details such as these will save you thousands of dollars in probate.
Whether you’re single, a married couple, or have minor beneficiaries, you should consider setting up a revocable living trust. There are distinct benefits for each group and the flexibility these types of trusts provide makes it easy to customize to your unique situation.
Whether a revocable living trust is the right choice for you and your beneficiaries depends greatly on your specific needs and circumstances. Although the advantages of creating a revocable living trust usually outweigh the disadvantages, the decision to create one requires a thorough legal analysis of several factors as they affect each individual and family.
It’s best to work with an estate planning attorney to determine if the costs of a revocable living trust outweighs the benefits for your unique situation.