Trusts: A Vital Estate Planning Technique
Covid-19 Highlights the need for revocable/living trusts.
Revocable Trusts, also known as Living Trusts, are being used with greater frequency in estate planning because they offer families immediate access to money and assets without having to wait for a loved one’s Will to be admitted to probate.
In a typical Revocable Trust, the creator of the trust (i.e., the grantor) is also the primary beneficiary and trustee during his or her lifetime. This allows the grantor unfettered access and control over the assets that were transferred into the trust during the grantor’s lifetime. Upon the grantor’s death, a named successor trustee takes over automatically and distributes the assets as specified by the grantor in the trust document.
Immediate Access to Assets
Probate (i.e., the determination by a court as to the validity of a Will, and the appointment of an executor or other fiduciary) can be a lengthy process which delays an executor from gaining access to assets. In many instances, immediate access to an individual’s accounts and assets at his or her death is essential to pay bills, manage investments and real estate, etc. With a Revocable Trust, accounts and assets can be accessed immediately to help pay bills, (such as funeral and medical costs, insurance and real estate taxes), while also providing immediate control over brokerage accounts whose values may fluctuate due to market volatility, as well as real estate.
During the coronavirus pandemic, with courts initially being limited to only emergency filings, stock market volatility and businesses on pause, the use of Revocable Trusts can provide even greater benefits. Even as courts are opening, there is a tremendous backlog of cases and filings.
Reduces Probate and Administrative Fees
Probate is time-consuming and can be an expensive and arduous process. A Revocable Trust, when properly funded, will avoid the probate process as to any assets which have been transferred to the trust. If there are no assets in an individual’s name at his or her death, such an individual completely eliminates the need to probate a Will. Revocable Trusts are particularly important for individuals with assets in more than one state. With a Will, each state generally requires its own separate probate proceeding to allow for the transfer of that state’s assets. By funding a Revocable Trust, the need for out-of-state probate proceedings can be eliminated.
In addition to avoiding probate, many state courts continue to oversee the actions of fiduciaries when assets pass under a Will. Whether it is requiring periodic accountings or permission from the court anytime a fiduciary change is needed, the ongoing administrative costs with a Will can be burdensome. Revocable Trusts can avoid these costs.
Privacy
Revocable Trusts can also provide a level of privacy over the disposition of assets. Probate is a public process. When a Will is offered to the court for probate, the Will and value of the estate become part of the public record. Anyone may access the Will and ascertain how and to whom assets will be distributed. A Revocable Trust that governs the disposition of an individual’s estate is a private document, which, if there is no probate estate, is not available for access to the public.