Revocable Living Trusts
A Revocable Living Trust is becoming increasingly common as a substitute for a Will to minimize the administrative costs associated with probate and to provide centralized administration of a person’s final affairs after death. It can perform the same functions as a Will, and more, while avoiding the costs of a Probate case, which is required if a person dies with only a Will (or no estate plan).
The primary benefits of a Revocable Living Trust, as opposed to just a Will are as follows:
Probate is the Court process through which a person’s assets pass to their heirs, whether via a Will or “Intestate Succession” (when someone dies without a will). Attorney fees for Probate cases are set by statute and are based on the gross value of the estate. For example, a $1,000,000.00 estate will have a base statutory attorney fee award of $23,000.00, and this assumes no “extraordinary fees” are warranted. The executor or administrator of the estate is entitled to the same fee, so a $1,000,000.00 estate will cost a minimum of $46,000.00 in probate fees alone, plus costs. A well prepared, and properly funded, Revocable Living Trust will allow an estate to be transferred to the decedent’s heirs without incurring Probate fees. Probate fees are calculated on the gross value of the estate assets, with no offset for debts (including the mortgage on a house). With home values being so high these days, anyone who owns a home should be choosing to create a Revocable Living Trust instead of just a Will.
Even someone who does not have an estate which would benefit from the probate avoidance of a trust might still consider creating one in order to appoint a trustee to manage assets left to minor children. If left to the Probate Court’s discretion, the funds will likely held in a blocked account until the child reaches majority, and those funds will be distributed, in their entirety, to the child at age 18. A Trust allows a person to designate a Trustee, who will be in charge of distributing the funds on behalf of the minor child during their minority, or even into adulthood. This allows the decedent to dictate a distribution of the funds at a future point after the child turns 18, or to distribute it in stages during the child’s early adulthood.
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