Revocable Living Trust

Advantages & Disadvantages Of A Revocable Living Trust

A revocable trust is a legal vehicle for owning property. A client can create one and serve as the trustee, who manages the trust assets. Revocable trusts, called “living trusts,” are immensely popular. You can set up the trust so that, at your death, the assets transfer to your intended beneficiaries, so it is a substitute for a will for many people.

However, our clients should think carefully about whether they want to create a revocable living trust or a different legal vehicle. Below, our estate planning attorney considers key advantages and disadvantages.

Advantage: You Remain In Control Of Your Assets

A trust requires at least three parties:

• Grantor or settlor: this person sets up the trust and deposits assets into it
• Beneficiary: this person gains the benefit of the trust
• Trustee: this person manages the trust assets for the benefit of the beneficiary

With a revocable living trust, our client can serve as all three. This means they can move assets in and out of the trust at will. With an irrevocable trust, by contrast, it is very difficult to remove assets once they have been placed in the trust.

Disadvantage: You Need To Pay To Create One

There are online “fill in the blank” trust documents, but they are less than ideal. Instead, you should meet with an attorney to draft your trust, which unfortunately does cost some money

You will also need to fund your trust with assets, and many people do not have anything to use. If costs are a concern, you might want to delay the creation of your revocable living trust, or you could create one with the rest of your estate plan, which can make it affordable.

Advantage: Your Trust Avoids Probate

Probate is a lengthy process, and your surviving family members might need to wait quite a bit before they can access cash and other assets. With a revocable living trust, you can ensure that they begin receiving income promptly, which can prove vital. Realize that your estate will not avoid probate altogether unless the trust contains all of your estate’s assets. Still, it can help create an income stream for loved ones.

Of course, the fact that a trust avoids probate does not mean that people cannot challenge it. But the process could be lengthy, and many people use trusts to ward off a challenge.

Advantage: You Can Maintain Privacy

Because a trust does not go through probate, the contents are not disclosed. This can be a big benefit for people who value their privacy.

You can also gain privacy while living. Because the trust is the title owner of the property, you can shield the asset from prying eyes. Of course, using a limited liability company (LLC) is another option for hiding ownership of assets that might make more sense, depending on the circumstances.