Pro — Avoid Probate: All assets held in a Revocable Living Trust avoid probate. Probate avoidance is especially helpful when you own real estate in more than one state. If real estate is owned in your name alone, it may trigger a probate action in each state where the real estate is located.
Pro — Privacy: Trusts typically are not filed with the court, which keeps information about your assets away from prying eyes. In contrast, Wills become public documents when filed with the probate court upon death. Moreover, as part of the probate process, several counties in Minnesota require the filing of an inventory and final accounting listing the deceased’s assets and disbursement of said assets. While persons desiring to see probate documents must now go to the courthouse to view them, the trend toward greater use of the internet by the court system threatens to eventually enable the curious to view the documents from the comfort of their living room.
Pro — Incapacity Planning: The creator of a Revocable Living Trust typically also serves as the original trustee of the trust. Once it is determined that the original trustee is mentally incapacitated, the successor trustee named in the Trust document is able to take over the management of the Trust assets, providing a relatively seamless transition.
Pro — Better Protection of Certain Beneficiaries: If one or more of your intended beneficiaries tends to be wasteful with money or is financially unsophisticated, the Trust document can specify that the trustee manages that beneficiary’s money for the benefit of the beneficiary. Also, Minnesota is particularly strong in its protection of trust assets for the intended beneficiary in case the beneficiary divorces or faces creditor claims.
Con — More Expensive to Create and Fund: Your lawyer fees for preparing a Revocable Living Trust document and for providing counseling related to the Trust will be higher than if you only use a Will-based plan. On the other hand, your family will avoid the probate filing fees and attorney fees related to probate if your assets are held by your Revocable Living Trust. (Note that some Wills state that a trust is to be created upon the death of the person creating the Will. These trusts are called Testamentary Trusts. Testamentary Trusts do not avoid probate.)
Con — Less Transparent: Because trust assets are not subject to the probate process — a public process — beneficiaries will not have automatic access to information regarding trust assets that don’t directly involve that specific beneficiary. If the deceased was in a second marriage but had children from a previous marriage, secrecy can lead to problems.
Con — Asset Mix May Make Trust Ownership Cumbersome: If the only assets of the deceased are a house, a car and a small bank account, a Revocable Living Trust may not be worth the extra expense of establishing and maintaining the Trust. Similarly, Revocable Living Trusts may not be the optimal choice for dealing with retirement assets.
The above pros and cons are but a brief overview of the advantages and disadvantages of a Revocable Living Trust. A lawyer whose primary focus is estate planning can help you sort through the pros and cons to help you figure out whether a Revocable Living Trust is the best option for you.
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