Should I Have a Revocable Living Trust?

Having a properly drafted Will is essential to any estate plan. However, many question whether a trust is beneficial, or even necessary, to their estate plan. There are many different types of trusts which serve many different purposes.  One of the simplest and most common types of trusts are revocable living trusts (“RLTs”).

An RLT is created by a grantor and allows a trustee to hold and manage assets for the benefit of named beneficiaries. The grantor can change or revoke the trust at any time. The trustee, who is also the grantor, has control of these assets. Once the creator passes away, assets properly titled in the name of the RLT pass to the named beneficiaries in the trust document.

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For example, assume I have a house in Pennsylvania, a house in New Jersey, a checking account, and a savings account. If I were to utilize an RLT, I would need to transfer both properties from my name to the name of the RLT and change the title of my two bank accounts to the name of the RLT. I would be able to control those assets as the trustee of the RLT, but after I die, the assets would pass to my beneficiaries as designated in the trust document, not under a will.

Revocable living trusts are desirable when one has the goal of making the administration of their estate simpler and more private, as there is no need to probate the trust like you would a will. When there is property held in multiple states, like in the example above, an RLT eliminates the need to probate the will in each state where there is property. However, having a will is still advisable even with an RLT so as to “catch” any assets that were not retitled to the trust during the grantor’s life.

In the alternative, some find the idea of retitling all of their assets as too daunting of a task and prefer to proceed with a will. Furthermore, a common misconception is that having a revocable living trust helps save on taxes, that the assets in the name of the trust are protected from the grantor’s creditors, or that the assets are not includable when determining eligibility for federal benefit programs. This is generally not the case because you, as trustee, still have control over the property, even if the assets are no longer in your name.

It is important to weigh these considerations when designing your estate plan with your attorney, and determining whether a revocable living trust is right for you.

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