Why Should You Have a Revocable Living Trust?

Many people wonder if they should create a revocable living trust as part of their estate plan. There are many different types of trust documents that can be very complex and this article does not cover all of the options or reasons to have a trust, however, for the majority of people, a standard revocable living trust (RLT) is sufficient to meet their needs.

One of the reasons a RLT is important is to control the distribution of your estate after your death. A RLT allows distributions to be made over time, whether it be a set amount in monthly payments to the beneficiary or lump sums amounts being distributed when the beneficiaries reach certain ages. This is important if the beneficiaries are not responsible with their finances, and you may be worried they might “blow it”. The RLT can also allow for the trustee to have discretion to withhold distribution in the event the beneficiary is going through a hard time, such as troubles with substance abuse or the beneficiary is being sued.

Another reason a RLT can be beneficial for your estate plan is if you own multiple parcels of real estate that would require probate after your death. This can be costly and time consuming for your beneficiaries after your death if they must go through probate. The real estate can be transferred to the trust by deed to avoid probate and later be transferred to the beneficiaries pursuant to the terms of the trust after your death. This also applies to any businesses that you may own. Such interests in the business can be assigned to the RLT to avoid probate and make for a smoother transfer for the beneficiaries.

Creating a RLT is most common to avoid probate. Once the RLT is created, you must properly fund the trust, meaning transfer your assets to the RLT. If your assets are not titled in the name of the RLT at the time of your death, or are not payable on death to an individual or the RLT, then the assets still must go through probate.

It is important to meet with an experienced attorney to find out if a RLT is right for you and how to properly create and fund an RLT.