Is a Revocable Living Trust really your Best Choice?
Many people have attended a seminar or have read an article that describes a revocable living trust (RLT) has the greatest thing since sliced bread. The RLT has many advantages; however, it also has several disadvantages when compared to a Last Will and Testament (Will). We will is consider both the advantages and disadvantages so that you can talk intelligently with a legal professional about what might be the best choice for you. Advantages First, a fully funded RLT should avoid probate. Unfortunately, many people come to our law firm after the death of a loved one who has left one or more assets out of their RLT. Consequently, a probate is required for even a single bank account or brokerage account left out of the RLT. The good news is that the probate process in the state of Texas is a relatively simple and inexpensive process since Texas law provides for “independent administration” without court supervision or control as long as you have named someone as an independent executor. Second, the RLT provides a an excellent way to avoid an ancillary probate when someone owns out of state property. Anytime someone has real estate in a state other than Texas, that person should consider using an RLT. We once had a client who owned five pieces of real estate in five different states. Can you imagine the additional cost and time necessary to handle an ancillary probate in each state? Third, the RLT is frequently used to avoid a will contest. One of our clients had a 42-year-old son, a 38-year-old daughter and a 36-year-old daughter, but he also had four other children under the age of five and a 39-year-old second wife. Do you think it is highly likely that we might anticipate a will contest? If someone is unhappy with the Will, that person can simply file a letter with the judge saying that they believe it is not fair. Then, everything grinds to a halt until the Will contest is resolved. With the RLT, The successor trustee handles the trust administration without any court involvement after the creator of the trust dies. Only if the person who is unhappy with the RLT (1) hires an attorney, (2) files a lawsuit and (3) convinces a judge that the successor trustee should be stopped, does the trust administration become delayed. Fourth, the RLT can be of great mobility for those people who may move from state to state due to job transfers or retirement. The Last Will and Testament is designed for the state which you reside. The RLT is designed to cross state boundaries much more easily. Finally, the RLT is very helpful for someone who is suffering or is likely to suffer a long-term disability. Some financial institutions are reluctant to accept a financial power of attorney (also know as a Statutory Durable Power of Attorney), but we have never seen a financial institution refuse to work with a successor trustee of the RLT. When a disability occurs, the last thing you need is difficulty dealing with the financial institutions who are holding the assets needed […]
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Wills vs Trusts
As a lawyer who prepares a lot of Wills and Trusts, I frequently meet with prospective clients who are unsure if a Will or a revocable living trust (or “RLT”) would best meet their needs. Typically a well drafted Will would suffice because the actual number of people in Texas that actually “need” an RLT are very few. However, there are several specific situations where an RLT can be advantageous when compared to a typical Will. Probate Avoidance: If you transfer all of your assets to the name of your RLT, you can then avoid the need for your family to go through probate when you die. However, if you forget to transfer one asset to the RLT or later buy an asset in your personal name instead of the name of the RLT, you might not be able to avoid probate for that one asset. Out-Of-State Property: Perhaps the most common advantage of the RLT over a Will involves the transfer of property located in another state or country. For example, I have a friend who inherited the family real estate located in Florida. If she simply had a Will, we would need to probate her Will in Texas to transfer her Texas property and again in Florida to transfer the Florida property. However, by transferring her out-of-state property to the RLT, she can avoid probating her Will in Florida. Will Contest: An RLT can provide better protection against a challenge or contest of the Will or the RLT. If you have a Will that has been filed for probate, then a court case is opened in the county courts and it is very easy for someone to challenge the Will in that open court case. It might be as simple as writing a letter to the Judge. If the client had an RLT instead of a Will, there is no need for the Trustee to open a court case at all. This means that a person wishing to challenge the RLT must jump through more legal hoops and file a lawsuit in the appropriate court to challenge the RLT, which makes it that much harder for him or her fight your wishes. Mobility: For a family that moves from state to state, an RLT offers the benefit of being much more mobile than a Will. An RLT typically has a provision that allows the Trustee to change the applicable law which governs the trust with a simple notice to the Trustee. This provision can be triggered each time the family moves to a new state to change the governing law of the trust match the new state’s laws. Conversely, a Will is more likely to need drastic revisions to comply with the new state’s laws. Management During Disability. With the aging of the baby boomers, more clients need an RLT to assist with management of their assets during a disability. If an aging spouse or an aging parent is losing their ability to manage their own finances, an RLT can be used as an asset management vehicle. The spouse without the disability or […]
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