Revocable Living Trusts
Many folks are interested in forming revocable living trusts as a part of their estate plan, and many others are interested in selling revocable living trust kits. Here’s what you should consider if you are wondering if this estate planning tool is right for you:
- Where do you live? One of the highlights of revocable living trusts is they are designed to avoid probate. If you live in Texas, the probate process is relatively simple, allowing for an independent administration of assets which typically only requires one short court visit. In states like this, forming and administering a revocable living trust would generally be more of a hassle (and often more costly) than the probate process itself. If you live in a state that only has dependent administrations, a revocable living trust may be more beneficial to you.
- What types of assets do you have? Some assets can be titled in such a manner that they avoid probate without the need for a trust. Accounts with designated beneficiaries and life insurance policies with designated beneficiaries also will avoid probate.
- What amount of assets do you have? Some promoters of revocable living trusts claim that they are good tools to avoid estate taxes. The 2016 federal estate tax only applies to estates worth over $5.45 million ($10.9 for married couples) – so if your total assets are worth less than that, the federal estate tax will not apply to you. Texas does not have a state inheritance or estate tax, but other states do. Revocable living trusts in their simplest form will not aid with avoiding estate taxes, but adding certain provisions to the trust document can provide some tax savings. Those provisions, however, may be better suited to be added to a will rather than a trust.
- Where are your assets located? One of the best uses for a revocable living trust is to avoid what is called ancillary probate. When you have property in more than one state, you may be required to go through the probate process in one state, then go through the ancillary probate process in the other states to transfer ownership of the property located there. If you fit into this category, a revocable living trust can be a very beneficial tool.
Although this list is not all-inclusive, it is meant to give you a good start to understanding whether this device is right for you. While revocable living trusts can be a valuable estate planning tool, they are not right for everyone. The best way to design your estate plan is to meet with a knowledgeable advisor who can review your current situation and make a recommendation based on your wants and needs.
This blog is for informational purposes only. It is not intended to be and should not be relied upon as legal advice.