A revocable living trust is an estate planning instrument that allows you to keep assets in a protected entity during your lifetime and to pass them on to beneficiaries after your death. During your lifetime, you can serve as the trustee, maintaining full control of the assets and altering the trust as desired. In the event of your death or incapacity, the trust assets are transferred to the person you have named as your successor trustee, who takes over the management of your trust and distributes assets to your beneficiaries according to your instructions.
A revocable living trust may be useful for some estates but less so for others. It depends in part on the size and complexity of your assets and also on your objectives for distributing your wealth. To make the best choices in your estate planning, consider these relative advantages and disadvantages.
- Avoiding Probate — Probate is the legal process of managing your estate and transferring assets to your beneficiaries after your death. Because probate can be a complex, expensive and lengthy process, many people prefer to avoid it altogether.
- Protecting privacy — Another aspect of avoiding probate is keeping private your estate and all the decisions you make about it. Unlike probate of a will, a revocable living trust is administered privately with no court involvement unless a challenge is raised.
- Facilitating changes — Unlike the process for changing a will, it is easy to change trust beneficiaries or to designate another person as a trustee or a successor trustee. The same is true for transferring property into and out of the trust during your lifetime.
- Continued maintenance — Ongoing maintenance is needed to ensure that all assets in the trust are managed properly and that nonperforming investments are replaced by more profitable ones.
- Complicated treatment — Because revocable living trusts are not common in Washington, they can actually create more complications after your passing — particularly if they are not created or maintained properly.
- Lack of court supervision — Whatever complaints may be made about probate, it is at heart designed to prevent a decedent’s assets being pilfered by or placed in the hands of unintended parties. Among other protections, probate provides a forum for resolving challenges.
Contrary to popular notion, there is no real tax advantage to using a revocable living trust instead of a will. All income earned by the trust assets is reportable on your tax return during your lifetime. As for estate tax, both federal and state laws provide for very high exemption amounts that are indexed for inflation.
If you want to discuss whether a revocable living trust is right for your estate, get in touch with Bottimore & Associates, P.L.L.C. and schedule an initial consultation with one of our estate-planning attorneys. Call our Tacoma office at 253-272-5653 or contact us online.