The Benefits of Revocable Trusts in Estates Less Then $5 Million

Posted By Jay Kaufman || 27-Mar-2012

Are Living Trusts Created Just For Tax Benefits?

For Professional Advisors. Lawyers and advisors around the country are getting some push back from their clients when they recommend Revocable Living Trusts (RLT). The issue seems to be that their clients perceive RLTs to only be good as tax planning tools.

With the federal estate tax exemption currently set at $5 million per individual and $10 million per married couple, some perceive a reduced need for such trusts.

But there are many important benefits to the RLT beyond tax protection.

Keeps You in Control

With a properly drafted RLT, a client can not only control who inherits his assets, but also how those assets are disbursed and under what circumstances.

The Grantor (your client) can set up rules or stipulations in the trust that must be met before assets are inherited by beneficiaries. The Trustee, chosen by your client, manages those assets according to your client’s wishes.

Some clients want the Trustee to have a lot of control, particularly when beneficiaries are minors or are financially inexperienced. Others want the Trustee to exercise less control, particularly when the beneficiaries are mature adults. We encourage our clients to keep beneficiary assets in trust for Protection and Privacy.

Protection and Privacy

Even properly drafted, a simple Will is essentially no more than a letter to a probate court judge. It informs the judge of the decedent’s wishes about what he or she wanted done with personal property and other assets, but the court can rule differently.

Court hearings and documents filed in a probate case are public record, meaning that if all your client had was a Will, then his personal worth and any records of family infighting over the estate could make the headlines. An RLT is executed outside of a probate court’s venue, keeping the entire matter private and out of public view.

After death, the RLT continues to offer protection to the client’s heirs. If left in the name of trust, assets are shielded from the beneficiaries’ creditors, lawsuits and divorce settlements. It also helps protect your client’s children from “accidental” disinheritance when a surviving spouse remarries.

Reduction in Stress

Probate can last many months to several years, depending on the size and complexity of your client’s estate. Administering a trust can often take less than a year.

Ask your clients how much grief and anxiety they are willing to let their heirs endure after their death due to poor planning. An RLT can dramatically reduce the wait time for an estate to be settled, allowing beneficiaries to move forward with their lives much sooner and receive the assets your client wanted them to enjoy and benefit from.

Have you experienced push back from a client when you propose a revocable trust? Please let me know by post a comment.

Revocable Living Trusts are flexible tools. If you think you have a client that may need one as part of his or her plan, we would be delighted to talk to both of you about its benefits.

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