Millions of Americans die each year without any type of estate plan in place, and this forces their families into the court system, where they experience huge expenses with probate and significant time delays when they would rather be mourning.
Nobody wants to think about dying, but being prepared for a disaster is important in every instance, and dying with your assets disorganized could be just that: a disaster.
In fact, more than 50 percent of Americans don’t even have a will or any type of estate plan whatsoever. So is a ‘Will’ the simple answer for everyone, certainly not. Many need to take a little extra time and money to implement a revocable living trust (RLT) as part of a coordinated estate plan. It could your family thousands of dollars later and tons of time.
Truth be told, there are a number of reasons for an RLT, and far too many to explain in one article of this length. Yet, I will do my best to endeavor and explain 5 of the main reasons to implement an estate plan with a living trust:
Creative Provisions for Children
Many parents and grandparents don’t realize how creative they can be in distributing their assets upon their passing. Once they discover this flexibility, they generally take a 2 pronged approach. One, they want to provide a ‘carrot’ for those children or grandchildren who are willing to work for OR earn their inheritance. Second, they also want provisions or ‘stick’ that doesn’t allow them to abuse their trust and inheritance and make reckless or lazy decisions.
Here are just a few options to consider provisions in a well-drafted estate plan:
Children with Special Needs
I’ve learned from those dedicated and amazing parents with children who have special needs, that their greatest waking concern is “what will happen to my child if I’m not there to take care of them?”. I can’t imagine this constant fear and stress.
However, a well drafted Living Trust can help dramatically reduce this pressure and concern. Provisions can be drafted for a specific guardianship, trustee for money and a structure and procedure to still access Federal and State aid if needed. There can be back up plans created and implemented so parents can rest assured there will be some safety net for their handicap child if they predecease them.
Avoiding the Dreaded Probate
One of the key reasons for using an RLT is to avoid probate, which means avoiding attorneys, judges, courts, and the state sticking their noses into the family affairs. Probate is essentially the court’s process of determining if the will is valid, then executing its provisions. If there isn’t a will, then the court distributes the assets according to state law.
In order to make sure the trust does its job, it needs to be funded by holding title to AT LEAST four main assets in order to stay out of Probate Court. Even the best and well drafted trust in the world is worthless if it isn’t “funded”. It’s critical that the following assets be titled or owned by the trust, not simply listed in the Trust document somewhere:
A ‘Plan’ for the pets
A revocable living trust is a perfect place to have a plan for your pet: the one that loves you unconditionally and doesn’t ask for money. What will happen to this ‘best friend’ if you pass away?
Believe it or not, every year thousands of pets are euthanized when the pet owner dies themselves and no one wants to take the pet. The reality is, however, if someone was designated in advance AND given a financial incentive to take care of the pet, this disaster could be avoided.
At our law firm, we now ask every client during the drafting process if they own a pet and have a section to deal with such matters. Who would be the guardian of the pet, how much would the receive for the service? Who would be the ‘back up’ in case the primary caregiver wasn’t able to continue? Where do you want your animal buried? These are all important and sensitive topics for a loving pet or animal owner and should address these issues in their revocable living trust.
How is your own health?
A revocable living trust can be an excellent structure for managing your finances if you can’t seem to handle the pressure as you get older. It’s very common for a family to rely on the trust and maybe a trusted advisor or children to manage the trust while mom or dad is still alive.
In fact, you could be perfectly sound mentally or physically, but some scenario occurs where resigning as the trustee makes it a powerful tool to help you manage your affairs.
Don’t think a trust is just for rich or old people either. If you have children, life insurance, or might just get in a car accident and need someone to manage your finances and pay your bills, your back up trustee steps right in to manage what you do have through the trust instrument.
In summary, a quality estate plan with a revocable living trust is becoming more and more common for single AND married individuals, children or no children. Moreover, remember that a quality estate plan includes a number of ancillary documents such as a will, powers of attorney for finances and health care, an advance medical directive or living will, burial instructions, a directive for organ donation, final instructions, etc.