There are a multitude of reasons to have a revocable living trust. We can’t begin to cover them all, but we will touch on three reasons very briefly here.
Reason #1: Protecting Property for Certain Beneficiaries
When most of us think about estate planning, we think about passing our property to our family and other loved ones after we die. However, sometimes our intended beneficiaries are unable to handle an inheritance. Minor children are the most common example of this. Minor children aren’t even allowed to own property in many states. In most states, a guardian is appointed to hold the property on behalf of inheriting children until they are legally old enough to own property. Most minors and young adults simply lack the capacity to handle substantial funds without guidance. The continuing trusts for descendants established under a revocable living trust do not face the same administrative requirements that testamentary (e.g. Will based) trusts do.
Reason #2: Managing Property upon Incapacity.
A major concern today is the idea of outliving your assets. Many people worry about whether or not their parents can live in their own homes. Many worry about how their parents’ bills are being covered and about the safety of their money from other people. Unfortunately, in the case of parents who have not done adequate estate planning, the only option is to file an application with the probate court for a guardian. That’s a jaw-grinding experience, because it exposes personal and financial information to total strangers. Besides, it’s a humiliating indignity to be declared legally incompetent.
Don’t put your own children through that painful experience.
A revocable living trust solves this problem. A revocable living trust allows your successor trustee to take control whenever you resign or are incapable of handling your affairs. There is typically no interruption in the management of assets, and there is no court supervision. Revocable living trusts also enjoy a greater level of acceptance throughout the legal and financial community, and almost all states provide a broad range of statutory powers regarding the management of trust property. While it is true that a living trust isn’t effective unless your property is in the trust, a durable power of attorney will enable your attorney-in-fact to transfer property into your trust if you can’t do it on your own.
Reason #3: Avoiding Probate.
When you die, property in your revocable living trust will not go through probate. That’s because the living trust itself spells out who gets to take ownership of the property. It’s very similar to 401(k) plans, life insurance, annuities, IRAs, and company retirement plans. Since those properties each have a designated beneficiary, those properties do not go through probate but, rather, pass to the beneficiaries without the time delay and expense of probate. The probate process in New Jersey is fairly straight forward, but New York is not.
Jointly owned property with a right of survivorship does not go through probate either. It passes automatically to the surviving joint owner. Unfortunately, relying completely on joint tenancy laws is not advisable. In the case of widows or widowers it may result in an unequal distribution to children, unintended tax consequences and sibling conflict. A revocable living trust allows clients to consolidate assets and distribute them efficiently during disability or after death.
Estate Planning can be Daunting
The process of planning your estate can be a daunting task. The good news is that you don’t have to do it alone, because we are a law firm dedicated to helping you develop and monitor a complete plan that achieves your desired results and minimizes the obligations of your loved ones.