Dear Mr. Premack: My husband and I already have a Will that we got online, but more research on Google seems to show us that Wills may not be the best approach for privacy. We would like to avoid probate using a Revocable Living Trust. Can you run through the pros- and cons- of that type of estate planning? – T.O.
There are several different kinds of Trusts. Many are set up by you solely to benefit someone else. The exception is a Living Trust. It is set up by you to solve your own estate and probate problems and may also help you achieve other commendable goals. For example, a Living Trust can help you provide care for yourself and your spouse during a disability, help avoid probate when both spouses die, and can help transfer assets to your heirs with minimal legal intervention.
A prerequisite to achieving any of those goals is to determine if a Living Trust is the best approach for you. Sometimes a Living Trust is NOT the best legal tool to help you achieve your goal. There are other techniques that address the same issues, which may be easier or less expensive for you. Don’t jump into doing a Living Trust until you have talked with Premack about your specific situation. Also, don’t jump into getting anything online even though junk living trusts are available online or from trust mills.
If a Living Trust is right for you, Premack will help write the Trust agreement to contain your instructions and meet your goals. One Living Trust requirement which for some people is a complication, and for others is a great choice, is that you must transfer ownership of your assets to the Trust. Why? A Trust cannot die, so when the Trust owns the assets there can never be probate of those assets. Probate may still be needed if you leave assets outside the Trust (perhaps you acquired them after it was set-up). A Will is still needed to as a safety net in case there are testamentary assets outside the Living Trust when you die.
Typically, your Living Trust names you as the Grantor – the person who owns the trust, and as the Trustee – the person who controls the trust, and as the Beneficiary – the person who has financial benefit from the trust. In the Living Trust agreement, you specify successor Trustees in case you become incapacitated or for after your death. That way, Trust management is not interrupted. The Trustee continues to handle your finances, pay your bills, and provide for your other monetary needs if you become disabled.
If the Living Trust is set up for two spouses and is properly funded, probate is avoided at the first death and the Living Trust continues for the benefit of the survivor. This works best when title to the house and other properties you own, have been transferred into the Trust at the time the Trust was established. The Trust can deal with non-homestead real estate and is especially useful when you own real property in more than one state.
One time that a Living Trust is not a good tool is when one spouse needs nursing home care and seeks Medicaid benefits to help pay the bill. The state government would use the trust’s existence as justification to deny benefits. In that event, the trust can be left unfunded but be named as the recipient of an after-death interest in the homestead property with a proper deed.
For those with more substantial estates, your properly written and funded Living Trust is going to mimic a Will by identifying who will receive the Trust assets when you die. Providing for yourself and your loved ones with a Living Trust can be very flexible. You can instruct the Trustee to make outright distributions, no strings attached, so your heirs get their inheritance and can do as they please. You can instruct the Trustee to continue to hold assets in the Trust while disbursing funds over many years. Another potential benefit of a Living Trust is if one of your adult children is in debt, or is disabled, or is in a troubled marriage you may be able to protect that child’s inheritance from those dangers.
Consult with Premack to determine what legal planning tools are best for you.
Column published on September 20, 2021.
Paul Premack is a Certified Elder Law Attorney for Wills and Trusts, Probate, and Elder Law issues. He is licensed to practice law in Texas and Washington. To contact us, click here.