Legal Insights: Avoiding Probate with the Revocable Living Trust
By Candace Beckett
This column presents general information regarding estate and disability planning and probate. It is not intended to create an attorney-client relationship or constitute legal advice to its readers. Individuals with legal concerns should consult with an attorney for advice regarding their specific circumstances.
In my previous articles in Outlook, I discussed legal documents, that in addition to the Will, everyone should have included the Financial Power of Attorney and the Medical Power of Attorney.
In this issue, I want to discuss a legal document that not everyone will need, but for certain people it could be very important and cost-effective. This is the Revocable Living Trust — another estate document besides your Will with which you can legally pass your assets to your heirs.
Here are the benefits of having a Revocable Living Trust, but first some definitions:
- A Trust is a relationship whereby property is held by one party for the benefit of another.
- A Living Trust is a Trust created during your lifetime as opposed to being created through your Will after you are dead. A Living Trust transfers your property to a trust, names a trustee, and identifies who gets your property (beneficiaries) when you (the grantor) pass away. The trustee is the person who will manage the trust property. While you (the grantor) are alive, the trustee is generally you (the grantor) and then, upon your passing, your appointed successor trustee takes over the administration of the trust.
- Most Living Trusts are “Revocable” because you can change them as your circumstances or wishes change, hence the name, Revocable Living Trust.
A Revocable Living Trust allows you to be your own trustee and the beneficiary during your lifetime. This is important because it allows you to retain control over the property you transfer into it and you can change its provisions at any time. Should you become incapacitated, your appointed successor trustee has the legal authority to manage your assets on your behalf without the necessity of a costly court proceeding such as a guardianship.
Most people use a living trust to avoid probate. Probate is the court-supervised legal process that is required to transfer a decedent’s property to their heirs. Probate can be time-consuming as it requires that the estate remain open for at least six months. And probate requires a number of legal steps including the filing of documents to open the estate, posting a bond with the county’s Register of Wills, notices to creditors, inventories and accounting reports.
Therefore, avoiding probate can offer a number of benefits. If you want your assets distributed smoothly and without delay, you ought to consider a Living Trust. With a Revocable Living Trust, your successor trustee should be able to quickly distribute your trust assets to your beneficiaries, usually within a matter of weeks.
If you value your privacy, a Revocable Living Trust may be the estate document for you. Probate is a matter of public record. The contents of Living Trusts are confidential. The identities of your heirs and the details of their inheritances are protected. People wanting to keep their affairs private may want to place assets in a Living Trust which is not subject to public scrutiny as is the case with probate.
If you own real estate in more than one state, a Living Trust should enable you to avoid probate proceedings in multiple jurisdictions. I recently had an estate in Maryland where the decedent also owned a vacation home in North Carolina and this required a costly, time-consuming, ancillary probate procedure in that state. Two-state probate proceedings would not have been necessary if the properties had been placed in a Revocable Living Trust.
If you are concerned that your Will may be contested, a Revocable Living Trust will make it more difficult for your Will’s provisions to be challenged under claims that you were either incompetent or subjected to undue influence.
I have tried to highlight some of the benefits to Revocable Living Trusts, but I must end on a word of caution. The Maryland State Bar Association and the Maryland Attorney General’s Office have pointed out that many people do not need living trusts. That is why I said at the beginning of this article, this is a legal document that “not everyone will actually need.” This is significant because the attorney fees involved in preparing a Revocable Living Trust can be more costly than a Will. Therefore, don’t let anyone scare you into obtaining a Revocable Living Trust when you might not need one.
Nevertheless, for certain people in certain circumstances, a Revocable Living Trust could be “very important and cost-effective.” I recommend that you consult with your family, financial adviser, and, of course, an attorney, to determine what is best for your estate plan.
Candace H. Beckett JD, LLM, is an elder law attorney who was admitted to practice law in Maryland in 1989. Ms. Beckett may be reached at 410.972.4540 or 410.370.0673, or visit her website at www.chesapeake-elder-law.com