Estate plans built around a revocable living trust instead of a will have become very popular. But they are more complex and a little more costly to set up, so many people do not understand why they should consider switching to a trust-based plan.
Your estate planning attorney can review the specific benefits based on your unique situation. But here are some of the general advantages to building a plan around a revocable living trust rather than a traditional will.
A Trust Helps Your Loved Ones Avoid the Need for Probate
If you’ve heard anything about probate, chances are it was not something positive. If your estate is worth more than $50,000 in assets, including your home, your estate could end up going through probate, the court process of changing ownership of your property to your heirs, and winding up your financial affairs when you pass away. Probate can be expensive, and it can take a long time.
In probate, the person designated as the executor of your will must petition the court for authority and then take a variety of steps required by law such as preparing an inventory and properly notifying potential creditors. If the executor makes a mistake, they can be sued, so families usually hire an attorney to guide them through the process. Between attorney’s fees and probate fees, you can expect costs to absorb between two to five percent of your estate’s value.
Probate generally takes between 6 to 18 months to complete in Virginia, and those named in the will generally do not receive any property until after the process is nearly complete. If you own property in another state, your executor may need to open an “ancillary probate” action in another state, taking even more time. When someone creates a revocable living trust to pass their property, the assets in the trust go directly to beneficiaries so they are not tied up in probate. If the trust is funded properly, your family can skip the probate process altogether.
How a Revocable Living Trust Operates
A trust is an arrangement set up to hold your assets. When you create a trust, your transfer your assets into it, and the property is then managed by a trustee for the use of a beneficiary. When you set up a revocable living trust, you usually serve as your own trustee, and you get to use the property as the beneficiary. So you still control and enjoy your property just as you did before creating the trust.
The difference is what happens after you pass away. You will have a successor trustee who steps in to pay your final bills, like the executor in a will, but this person won’t need to petition for court authority and follow the rigid probate rules. After bills are paid, your successor trustee can distribute the remaining assets in the trust directly to the people you have named as your successor beneficiaries. The process is quick and simple.
So, while a revocable living trust requires more effort to set up and fund than a traditional plan based on a will, it saves your loved ones considerable time and money in the future. If you own property in more than one state, a living trust can save you even more money because you can avoid ancillary probate in each of those states.
A Trust Can Also Avoid the Need for Guardianship
Another benefit of an estate plan built around a trust rather than a will is that it provides protection in case you become incapacitated. If an illness or injury leaves you unable to make or communicate decisions, your successor trustee can step in to manage your financial affairs. By contrast, if you become incapacitated with no trust or durable power of attorney prepared, your family must petition the court for guardianship, which is a legal process even more financially and emotionally draining than probate.
A Trust Protects Your Privacy
For some families, the privacy provided by an estate plan built around a trust is a significant benefit. When a will is admitted to probate, it becomes a matter of public record. Anyone who is interested can find out which family members were given particular assets, who was left out, or who got a lesser share of property.
If you believe only your immediate family has any business knowing this information, then it is wise to set up a trust to distribute your property. All distributions are handled privately, out of court and out of the public eye.
Talk to Jennifer Porter Law PLLC About the Advantages of a Revocable Trust
Even when you have an estate plan built around a revocable living trust, it is wise to have a will as a backup measure to cover property that may get left out of the trust. However, we can create a simple pour-over will to funnel remaining assets into your trust.
If you want to keep your family prepared for the future, a trust-based plan is one the best ways to achieve your goals. Contact Jennifer Porter Law, PLLC at (571) 532-9070 today to begin the process of creating your Virginia revocable living trust.