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.