What are the disadvantages of a revocable living trust

Revocable living trusts allow for changes at any time. A trust amendment can be created to edit certain provisions or beneficiaries. It is also possible to void or modify the entire contents of the trust through an amendment and reinstatement. The following is advantages and disadvantages of Massachusetts revocable living trusts.

Revocable Living Trusts

The downside of revocable living trusts are that assets in the trust are treated as personal assets. It therefore offers no special protection from creditors if you are sued. Upon death, all assets are subject to any state and federal estate taxes. Depending on your finances, these two items can result in significant risk or loss.

Reasons to Use Revocable Living Trusts

There are a few reasons why you would select revocable living trusts despite the disadvantages noted above. Below are the key reasons that many select this type of trust.

Planning for Disability

Revocable living trusts are often used to plan for future disability. Assets in a revocable trust can be managed by a trustee rather than by a court-assigned guardian in the event of mental disability. This can be an important factor when there is a family history of mental illness.

Avoiding Probate

The type of trust will determine whether the courts get involved. With revocable living trusts, assets are given directly to beneficiaries without going through a court proceeding. This shortens the transfer process and time frame.

Privacy Considerations

Because transfers take place outside of court, the trust agreement does not get filed into public record. Detailed information on your assets may therefore be kept private. The identity and assets transferred to specific beneficiaries is also not disclosed. This maintains the privacy of everyone involved.

More Advantages And Disadvantages Of Massachusetts Revocable Living Trusts

The advantages and disadvantages of Massachusetts revocable living trusts provided above was shared by Peter DaMore at Law Offices of Peter T. DaMore Jr.. For additional information on revocable living trusts and other elements of your estate plan, contact Peter at 781-229-7900 or via email at . We can explain the benefits of revocable living trusts and irrevocable trusts and help you select the option that best accommodates your situation.

Many people mistakenly think that creating an estate plan simply requires you to create a will detailing how your assets will be distributed upon your death. However, estate plans are often more complicated than that, even if you have a smaller estate. One estate tool you may consider adding to your estate plan is a revocable living trust.

What is a revocable living trust?

A trust is created by the grantor during their lifetime will transfer assets into the trust (e.g., cash, investments, property, insurance policies) and designate a trustee to administer the trust and at least one beneficiary. When you pass away, the assets in the trust will go to your named beneficiaries, as specified by the terms of the trust.

Advantages and disadvantages to revocable living trust

There are many advantages and disadvantages to creating a revocable living trust. One of the main advantages is that assets in the revocable trust are still owned by you, and the trust can be changed or revoked any time during your lifetime. Revocable living trusts can also help you maintain privacy, as there is no public record required, and you may be able to help your family avoid the lengthy probate process after you pass away.

However, the extensive costs and maintenance fees of a revocable living trust are often considered a disadvantage. Also, revocable living trusts, unlike other types of trusts, cannot protect your assets from creditors. Finally, because the property in the trust is still yours, it is still taxable and you must report income from the trust on your tax returns.

The benefits of an irrevocable trust generally outweigh the downsides, but these trusts are not necessary for everyone. An estate planning attorney in Kentucky with experience creating wills and trusts can help evaluate your situation and determine what estate tools are best for you.

When you are weighing your estate planning options, a revocable trust or living trust will likely be among the choices. Find out how to decide if you need a trust, and what the drawbacks and benefits of having a revocable living trust can be for you and your family.

Advantages of a Revocable Trust

For many people, a revocable living trust can be the best estate planning tool to balance their desires for privacy, flexibility, and control of their assets. Even if you don’t have a large estate, there are many benefits to a living trust.

Avoiding Probate

If you ask any estate planning lawyer why you should create a trust, one of the first things they will say is that it avoids probate. The Florida probate process can be time consuming and expensive for family members grieving a lost loved one. Assets within a revocable or irrevocable trust when a person dies pass easily to the beneficiaries named in that trust, without going through probate. This can reduce or sometimes even eliminate your probate estate, saving your family court fees and giving them quicker access to their inheritance.

Privacy

With few exceptions, everything done within the Florida court system is open to the public. Everything that gets filed with the court can be found if someone knows where to look. But the contents of a trust are private. Those trying to shield their loved ones from prying eyes often create trusts to pass their assets on to the next generation quietly.

Flexibility

One of the benefits of a revocable living trust is its flexibility. Because you create it, fund it, and manage it yourself as a trustee while you are alive, you can adjust how it works and what assets are inside it over time. This means you still have access to your money if you need it. You can even dissolve the trust if your circumstances change.

Ongoing Asset Management for Beneficiaries

Trusts also give you more control over your assets after you pass away. With a Will, your heirs generally receive their inheritance at the end of the probate process and are free to do whatever they want with it. A trust can be written with conditions and requirements that allow your trustee to manage assets on the beneficiaries’s behalf if they are too young or have trouble handling their own affairs.

Limited Challenges by Heirs

While the standards and possible grounds for challenging a will or trust are generally the same, it is procedurally much more difficult for a disgruntled family member to challenge your trust because no probate court is involved. That limits your legal heirs’ ability to overrule your preferences to get what they think is their fair share of your estate.

Automatic Assignment in Place of Guardianships

A trust can be beneficial even while you are still living. If an accident, injury, or degenerative disease leaves you unable to manage your own affairs, your family may need to ask the Florida probate court to name a guardian on your behalf. If you have a living trust, your co-trustee or successor trustee can step in automatically, often based on your doctor’s recommendation, without getting the court involved.

Disadvantages of a Revocable Trust

While there are many benefits to creating revocable trusts, they aren’t right for every family. Before you commit to the process, be sure to consider the downsides as well.

Upfront & Ongoing Costs

The documents establishing a trust are more complicated, and therefore more expensive than a simple Will. This means that a revocable trust is a more expensive estate planning option, although in many cases, paying more up front will save your family a much greater amount in fees and costs when you pass away. However, if you don’t have many assets, it may not be the right choice for you.

Funding the Trust

Just signing a revocable living trust document isn’t enough. You also need to fund the trust. This involves signing new deeds to property (which our office generally handles) and transferring or opening new bank accounts. This can be annoying (no one likes doing paperwork or going to the bank!), but it is also essential. An unfunded trust won’t let your trustee manage your affairs the way you intended, and could undermine many of the benefits you hope to gain from it.

Trustee Challenges

While a trust is more difficult to challenge than a will, it does not eliminate the risk entirely. Your trustee may still face a petition that they be removed in the Florida probate court if a beneficiary feels the trustee isn’t doing their job properly. The costs of defending that action may come out of the trust’s assets.

How to Decide if a Revocable Living Trust is Worth It for Your Estate

Deciding whether the advantages of a revocable trust outweighs the disadvantages depends on the size of your estate, your circumstances, and your priorities for your family. Don’t make this decision on your own. At Harrison Estate Law, we know when to use revocable living trusts to protect our clients and when other estate planning options are better suited to your needs. We will review all the details of your family and your estate and recommend the best strategies for your particular circumstances. Please contact us online or via email or call 352-559-9828 to schedule a free consultation. If you don’t live close to Gainesville we are happy to set up a phone or Zoom call.