Advantages and Disadvantages of a Revocable Living Trust

Individuals creating or revising an estate plan often ask whether the plan should include a revocable living trust. Finding the answer to that question for your estate plan requires evaluating the advantages and disadvantages of a revocable living trust in the context of your personal and financial circumstances and overall goals. Through that discussion, your estate planning lawyer helps you determine whether you can benefit from including a revocable living trust in your estate plan.

What Is a Revocable Living Trust?

A trust is a fiduciary arrangement created by a grantor (or settlor), through which a designated trustee manages assets and distributes them to named beneficiaries, according to the terms of the trust document that establishes the trust. The provisions of the document govern all aspects of the trust, including whether it is revocable or irrevocable.

A revocable trust can be changed or terminated by the grantor at any time, as long as the trust remains revocable. That means the grantor can change the trustee, beneficiaries, and any other terms of the trust document, or even revoke or terminate the trust entirely. The terms of an irrevocable trust cannot be altered, except with intervention of a court in some situations. Some types of trusts are required by laws to be irrevocable.

A living trust, also sometimes called an inter vivos trust, is one created by a grantor during their lifetime. In contrast, a testamentary trust is created after the grantor’s death.

A revocable living trust in an estate plan usually has these characteristics, although there may be differences in specific situations:

• The grantor is typically the beneficiary of the trust during their lifetime.
• The trust is revocable while the grantor is alive. On the grantor’s death, the trust becomes irrevocable. At that point, other named beneficiaries receive the distributions from the trust.
• The grantor may be the trustee during their lifetime, with a successor trustee taking over responsibility for the trust after the grantor-trustee’s death.
• The grantor retains full control over all the assets in the trust during their lifetime.

For a revocable living trust to be effective, the grantor must fund the trust. The grantor’s estate planning lawyer provides guidance on the funding process after the trust is set up.

Advantages and Disadvantages

Some estate plans benefit significantly from inclusion of a revocable living trust. Relatively small or uncomplicated estates may not need this type of trust. A consultation with an experienced estate planning lawyer is the best way to determine whether your estate plan can benefit from a revocable living trust. Your lawyer will analyze the advantages and disadvantages in the context of your unique circumstances.

Specific advantages of a revocable living trust include:

• With a revocable living trust, the grantor has greater control over distribution and protection of assets in their estate plan, as compared to other methods of distributing assets in an estate. The trust provides distribution flexibility that is not available otherwise.
• Assets deposited in a revocable living trust during the grantor’s lifetime do not go through the probate process, which avoids unnecessary probate expenses and time. Avoiding probate also protects the privacy of the estate and the information relating to assets.
• For individuals who own property in more than one state, a revocable living trust can avoid ancillary probate in states where the individual does not reside.
• A revocable living trust can minimize family disagreements by including terms specifically aimed at avoiding disputes.

Potential disadvantages of a revocable living trust include:

• An estate plan with a revocable living trust usually costs more to set up than a simple estate plan without a trust. However, there ultimately are likely to be cost savings by avoiding the probate process.
• For a revocable living trust to operate, the grantor must fund the trust by transferring property and assets into the trust, both initially and on an ongoing basis as new property and assets are acquired. Maintenance requirements vary, depending on the grantor’s personal and financial circumstances. An experienced estate planning lawyer provides ongoing assistance with the maintenance requirements of a revocable living trust in an estate plan.
• The trustee must oversee trust management and distribution, both during the time the trust is revocable and after it becomes irrevocable. The grantor needs to ensure that the named trustee and successor trustee have the ability and qualifications to fulfill the fiduciary responsibilities of the position.
• A revocable living trust needs to be updated and revised as circumstances and goals change. Including this type of trust in an estate plan requires on-going attention to keep the provisions current and consistent with life changes.

Should You Have a Revocable Living Trust?

The decision about whether to include a revocable living trust in your estate plan is one of the most important determinations you make when you create or revise your estate plan. In some cases, having a revocable living trust provides substantial benefits. In other cases, a revocable living trust is not a necessary strategy to accomplish an individual’s estate planning goals. Counting on a knowledgeable estate planning lawyer for help in the estate planning process is essential.

Schedule a Free Consultation With an Experienced East Valley Estate Planning Attorney

At Peterson Law Offices, estate planning is a primary focus of our practice. We assist clients with creating a plan to fit their unique circumstances, including a revocable living trust in appropriate situations. If you do not have an estate plan, we help you put one in place that fully addresses your goals and circumstances. If you already have an estate plan, we can help with updating your plan to make sure it is current and provides the right approach for your circumstances.

We welcome inquiries from clients throughout the East Valley, including Queen Creek, San Tan Valley, Gilbert, Mesa, and Chandler. Schedule your free initial consultation by calling 480-878-5998 or using our online contact form.