Q. If I have a revocable trust, do I still need a will or an advanced healthcare directive?
A. You will still need a will and advanced healthcare directive even if you choose to place your assets in a revocable trust. The will not only deals with your assets but addresses important decisions such as who will take care of your minor children or receive certain family heirlooms. The advanced healthcare directive simple communicates to doctors and loved ones your wishes in the event of a life-threatening medical situation.
Q. If I have a will and advanced directive, why consider a revocable living trust?
A revocable living trust is a legal document that places your assets in trust for you during your lifetime and specifies how the assets are distributed upon your death. Assets are placed in trust either by re-titling the asset or by giving the asset to the trustee. Examples of assets that can be placed in trust include but arenâ€™t limited to real estate, bank accounts, personal property, vehicles and business interests. Because this is a â€śrevocableâ€ť trust, you can move assets in and out over the course of a lifetime.
You and your spouse are named as co-trustees. You are also required to name a successor trustee who will be responsible for transferring the assets to your beneficiaries according to your wishes. The successor trustee has a significant amount of responsibility if you were to become incapacitated. In this situation, they would be responsible for managing your affairs, including property or business issues. All of this takes place without court involvement.
The two big benefits of a revocable living trust are privacy and avoidance of probate.
Privacy: A will is a public document and probate court documents are open for the public to view. In contrast, trust documents are private and not open for review by the public. Assets in a trust are transferred without the involvement of the probate court.
Avoidance of Probate: In many states, probate court costs can be as much as 5% to 10% of the value of the estate and the process can drag out from several months to over one year. Probate in the state of Georgia is not known to be terribly burdensome but this could change over time. The successor trustee of a revocable trust can settle the trust outside of court without supervision.
Drawbacks: The most frequently cited drawback to the revocable living trust structure is the cost. Many just decide to have a will and advanced healthcare directive instead. You should inquire as to the difference based on your specific situation, but in most cases the difference in upfront costs is minimal. After considering the difference in backend costs, it is break-even at worst. The relative ease on the heirs seems more than worth the upfront costs.
Finally, donâ€™t forget to fund the trust. This is easily the most overlooked detail in the revocable living trust process. There is a fair amount of work required to place the assets into the trust; however, your financial or legal advisors should be willing to help with the execution.
A revocable living trust isnâ€™t necessary, but it is an excellent option for many. Certain situations make it even more attractive for some. Making the decision based on consultation with trusted legal counsel or financial advisor is the best path to ensure success.