ST. LUCIE WEST — The principal edge of the revocable living trust (RLT) is that it offers the chance of probate avoidance at the time of the passing of the owner with respect to assets which are transferred to the trust during the life of the owner. Similarly, in case the holder of the trust becomes mentally incapacitated, a guardianship through the court system mightn’t be crucial with respect to assets that have previously been transferred to the trust. But one should remember probate avoidance remains the principal advantage that a great durable power of attorney in most cases may also avoid the need for a lawful guardianship and, therefore.
The RLT will not provide any creditor protection or tax advantages. The reason that these edges are not achieved is understood by focusing on the word “revocable.” This word means that so long as you are effective at doing this, you are able to amend or revoke the trust or you want. Because you’ll be able to get the assets back whenever you desire, a creditor can step into your shoes and, in effect, exercise your rights to regain the property.
Likewise from a tax perspective, the Internal Revenue Service views you as possessing everything in your trust and, in case you have a taxable estate, everything will be includable in your taxable estate at your departure, subject to deductions and other exclusions, etc.
Switching back to creditor exemption issues: prospective creditors for us to be thinking about as we start aging comprise medical creditors, as, for instance, home health care, assisted living facility, or skilled nursing facility expenses. In the elder law side of our practice, we are continuously occupied helping families to get public benefits so as to preserve the highest possible quality of life and to prevent running out of assets and selections during one’s lifetime (at the same time as concentrating on the financial security of the health professional spouse).
Everything is an available resource for public benefits preparation functions. Quite simply, if you pay extra for a revocable living trust-based plan and have to do long-term care planning, then when you come to us, or other qualified elder law attorneys, the first thing we are going to do will be to take everything from your revocable living trust. Stage here being: why pay extra for a revocable living trust if you have a reasonable chance that we may need if you want to do planning for public benefits as time goes on to take it?
Let’s also take a minute to examine the probate avoidance benefits of the RLT. There are a few motives that these benefits will not be really that they are cracked up to be. You might be saying that the writer is a probate attorney and he does not want me to avoid probate, but that would not be true, we help people avoid probate and guardianship every day. That does not suggest that the best way to avoid probate is in the best interests of your family in all cases, although there is also nothing wrong with avoiding probate and the RLT is it.
First off, let us focus on which probate is. Probate is the process of administering through the courts assets titled in the decedent’s name alone. Assets that have a beneficiary designation (like retirement benefits or life insurance), joint assets with right of survivorship, ITF or POD accounts and similar accounts usually do not go through probate anyhow.
The government has a public policy interest in managing assets through the probate court for a number of reasons, including: desiring to make sure that valid creditors get paid; desiring to make sure that taxing authorities are dealt with correctly; needing to present a forum to ensure this is truly your will and is not the product of fraud or undue influence; needing to ensure that your personal representative treats the beneficiaries properly; including wanting to make sure that the rights of surviving spouses and minor children are suitably safeguarded. Merely because someone can avoid probate does not mean that these public policy concerns usually are not important and there are certain components in the trust code that look at a number of these problems when there’s no probate.
For example, if we are advising a successor trustee after your death, we want to be sure they do not distribute all the assets without adequately protecting themselves from possible creditors and taxing authorities as well as another legal exposure. In a nutshell, merely because you avoid probate with the RLT, doesn’t mean your beneficiaries and fiduciaries aren’t going to want legal aid after your death.
The key will be to make sure that legal assistance is obtained at an acceptable fee. Part of the means to ensure that occurs is for your family to understand that your beneficiaries are not locked in the attorney who drafted the document. Hiring of an attorney to help after departure is an individual decision of your personal representative or successor trustee and they are able to hire their desire.
Attorney’s fees are often the most critical expense.
A substantial fee can be produced by this presumptively practical legislative act where, as an example, the estate is big but focused in comparatively few assets that need to be dealt with. Because situation, your personal representative can shop around for a lawyer to be sure that only there is a fair fee incurred. This isn’t to say that you need to shop for cost just. Clearly, you want to hire somebody who is aware of what they’re doing.
Alternative of a lawyer could function as the issue of another post, but the Florida Bar has provided one means to be certain that somebody understands what the are discussing and that’s the board certification application. Typically, if you retain a lawyer Board certified in wills, trusts and estates, he/she will have demonstrated to the bar that they’re competent to supply these services (through assessment, needed continuing education, and peer review) and Board certified attorneys are the only lawyers who can refer to themselves as specialists.
Getting back to the issue of whether the RLT prevents the possibly important attorney’s fees along with other expenses of probate, you also need to be proposed that the trust code features a company statute to the presumptively reasonable lawyer’s fee statute in the probate code. The trust statute suggests that it’s presumptively reasonable if the lawyer helping settle the RLT doesn’t bill more than 75 percent set forth in the probate statute.
Obviously, I can not speak for other lawyers, but I think it may be relatively standard that lawyers may charge $1,500 or more extra for an RLT strategy compared to a will-established strategy.
Having pointed out all the foregoing motives concerning why an RLT might disadvantageous, one do not desire this article to stand for the proposal that the RLT isn’t really a good planning vehicle. I simply wanted to help it become clear the probate and guardianship avoidance advantages are the primary gain. This benefit can be extremely advantageous in the fact situation that is appropriate. Some of the factors which may make an RLT-established strategy more attractive than a Will-based plan might contain: (1) possession of real property in more than one state (might demand probate in each state); (2) raising net worth (even if you had been only saving 25 percent of probate, which could become quite significant); (3) advancing age (the old you are, statistically the closer to incurring the probate or guardianship expenses); and (4) singleness (if married couples possess all of their assets together or have beneficiary designation to the survivor, no probate will be necessary).
Personally, in many of the preparation scenarios we see, one feel really comfortable recommending will-based plans for our customers. On this particular issue please also review the article one published in February concerning, “Why an ‘I Love You Will’ May Not be the very best Treat for Your Valentine.”
The single most important estate planning record is probably a General Durable Power of Attorney, as I almost always say once i speak on these matters. No Power of Attorney is not better than any Power of Attorney. Perhaps that will function as the theme of the next post one print.