Top 11 Reasons Why a Revocable Living Trust is Needed.
When it comes to estate planning, there are a lot of red flags indicating a need for some specific protections. However, one of the biggest solutions is a well-drafted, optimally-funded revocable living trust to keep the estate out of probate.
The top eleven red flags listed below indicate an elevated need for trust.
- Kids fight/aren’t talking: When the kids aren’t getting along, there is a heightened possibility of family squabbles spilling over into the probate court. However, the more assets that are kept out of probate the less chance the kids will fight a legal battle in probate court.
- Kids irresponsible with money: Whenever an inheritance needs to be restrained or guided by a trustee, it is better that the trust is governed by the terms and conditions of the trust you created rather than one that has to be supervised by a court for years or even decades.
- Kids married to a “boss”: Sometimes, a spouse has undue influence over your child and the last thing you want is for them to create trouble with an estate. In these circumstances, it is often better that the trust be administered privately rather than more expensively contested through the probate court.
- Second relationship not getting entire estate: In the case of second marriages or relationships, the surviving spouse/partner is not always the sole or even main beneficiary, and the children from the first relationship are. Having the estate go through probate makes any restrictions and safeguards for the children much more vulnerable to contest, expensive if contested, and always with a lot of additional paperwork.
- Property in different states: Because states (at least North Carolina and a few other states I know) require probate of real estate outside the state of residence in each and every county. That means if a Last Will and Testament is used to transfer property in four different states, that means four different probate proceedings. If instead all four property deeds were placed into the name of a revocable living trust, then none of the real estate has to end up in probate.
- Complex assets, especially a business: Whenever the beneficiaries are not likely to understand the value or operations of certain assets, the process of getting full value is much simpler and less expensive when handled outside of the probate court.
- High number of assets: The fact is probate costs are more expensive based much more on the number of accounts and assets as opposed to the value. This is because when you use a Last Will and Testament and the estate ends up in probate there is always a minimum amount of paperwork and valuations required for each asset. In other words, one account worth a million dollars is far easier to deal with in probate compared to ten accounts totaling a hundred thousand dollars.
- Underage beneficiaries: If an inheritance needs to be governed by age restrictions, or even until age 18, it means that probate court needs to oversee the share and the trustee has to report to the court at least annually until the beneficiary gets all of the money or it is all spent on their behalf.
- Beneficiaries need substantial assets or support quickly: Probate takes time, so if the bulk of your estate is covered by a Last Will and Testament and ends up in probate, the average settlement time is about six to eighteen months. This means that beneficiaries who may need money right away may not be able to get it. (Believe it or not, there are actually “payday lenders” who will take a hefty cut of an inheritance to advance inheritance money quickly.)
- Drug addiction or mental illness: A beneficiary who suffers or has suffered from drug addiction or mental illness should probably not get an inheritance outright, at least not right away if ever. This means the inheritance should be held in trust, and it is far simpler and less expensive to handle the inheritance through a revocable living trust than through probate.
- Special needs beneficiary: When it comes to preserving benefits or even potential benefits for a special needs beneficiary, an inheritance in probate can be extremely problematic. Administering a trust for a special needs beneficiary can be for the rest of their life, and handling it outside of the administrative confines of a court.
Avoiding probate through a revocable living trust can be a good enough reason on its own. Still, there are often even slight complications that can make the Revocable Living Trust a much more attractive option compared to a Last Will and Testament. For more information on estate planning using a trust, check out the free program at www.freetrustcourse.com.