Reasons to Establish a Revocable Trust
In an earlier blog, we explored some of the reasons not to establish a revocable living trust. While these trusts have become increasingly popular in our day, they may not fit every single situation. Now let’s examine why you might want to establish such a trust. In full disclosure, my wife and I have had a revocable trust since 1995 and the vast majority of estates I have handled have been transferred through a trust rather than through probate court. Obviously, I think such trusts can be very helpful to many of us. Let me explain why.
WHY YOU MIGHT WANT TO ESTABLISH A REVOCABLE TRUST:
- The primary reason is to avoid the cost, time, and public scrutiny of probate court. While some attorneys market trusts as the best way to manage your estate, other attorneys will tell you that probate court in Arkansas is not too difficult of a process. However, your loved ones will likely end up paying more in fees to the attorney involved to manage your estate in probate court. It can take much longer to have the estate settled, and your estate assets and documents can become a matter of public record. I encourage executors (or personal administrators) to hire an attorney who is known for completing documents without long delays. With a revocable trust (assuming it is funded correctly at your death), you might need an attorney only to help you with any deeds that are transferred. Your loved ones might still need an accountant because the estate transfer process is basically the same from an accounting standpoint, but your trustee or successor trustee can manage most of the transfer process.
- Privacy is another important facet. My brother was mentally ill and we were concerned with my parents’ estate. We wanted to make sure that the way he received compensation and support was not public knowledge. A Will, if used in probate court, is filed for public inspection…a trust is not.
- Administratively, the trust provides a wonderful way to manage an estate. Your trustee(s) can assemble and inventory all the assets, collect all the insurance and other such assets, pay all the bills and final expenses, and then make distributions to beneficiaries in keeping with the trust language. This process can be much quicker and much more economical than the probate process. Also, in the case of a family that wants to leave their assets to their children by contract (POD, TOD, beneficiary statements, beneficiary deeds, etc.), they may die broke. In other words, if everything belongs to others immediately at death by contract, who will pay the final bills and expenses? Again, with one dependable child, this may not be an issue; but in many families with multiple children, it is a problem. I have seen situations where money was immediately divided, and one responsible child paid all the bills with their share. Their siblings refused to pay their portion of the bills – not exactly the outcome the parents intended. On the other hand, a revocable trust provides a nice “bucket” to collect assets, pay expenses, and then pour out the remainder as you instruct in the document.
- The types of assets to be transferred can also have a huge bearing on this decision. For example, if you own property in more than one state, you really need to consider a revocable trust. If not, your loved ones may be involved in a probate process here in Arkansas and a probate process in another state (called “ancillary probate” and usually involves other attorneys in that state and added fees).
The decision as to whether to establish a revocable trust may be best determined after consulting with those who have such trusts. Estate planning attorneys, financial advisors, and others who had managed such trusts may be helpful consultants in determining the right decision for you. Again, the real question for us is this – what would God want us to do? How would He want us to manage our estate for our families and for the Kingdom? For the reasons given above, a revocable trust might be a part of His plan for you.