A Revocable Trust (also known as "Revocable Living Trust") is an important estate planning tool. However, there is a tremendous amount of misinformation circulating about Revocable Trusts, so it is important to understand what they will do, and more importantly what they won't do. There are as many trust types as there are flavors of icecream and a Revocable Trust is just one flavor. It's a tool like any other that has certain advantages and disadvantages.
Is a Revocable Trust right for you? A careful analysis of your goals, concerns, and life circumstances is necessary to determine whether a Revocable Trust is an appropriate solution for your estate planning needs. A Revocable Trust could be an excellent planning solution for you, but review the information set forth below and then consult with an experienced Revocable Trust Lawyer before jumping to conclusions.
A Revocable Trust will avoid the cost and administrative burden of probate IF it is properly funded and maintained, which requires minimal effort, but some attention to details. For a married couple, the a Revocable Trust will avoid probate for each spouse (double benefit with a single joint trust). The cost of a revocable trust is usually less than the cost of a probate, but cost alone should not be the driving factor for creating a revocable trust in Louisiana.
If a person owns real estate (immovable property) in more than one state, then a probate is required in both states (twice the cost!). A probate outside of your home state is referred to as "ancillary probate." If real estate located in both states is owned by a revocable trust, it will avoid the cost and administrative burden of probate in both states.
When comparing the features of a Will vs Trust, a Revocable Trust is not recorded anywhere (unlike a Will), so the terms of your trust are not open to public inspection by creditors and curiosity seekers. If your Trust owns real estate, then an "extract of trust" must be filed in the conveyance records with minimal information sufficient to satisfy a scrutinous title examiner that your trust actually exists (and is not a fiction), but none of the terms or conditions are set forth in the abstract.
Capacity starts to diminish with age or for those with degenerative diseases such as Alzheimer's Disease. A revocable trust can be a very effective too to help manage assets and finances for the elderly or someone with Alzheimer's. The trust allows you to appoint someone you know and trust to be a Trustee in the event you are unable to serve or to continue to serve as Trustee of your own trust. You stay in control as long as you can, then you can allow a family member or another person to help manage assets for your benefit.
A Will can be challenged up to five (5) years filing the Will for probate, which is a very long window. If you are concerned about the potential for a dispute in your family, a Revocable Trust can reduce the risk by starting the clock upon formation of the trust rather than on the date of death, as well as making it more expensive to challenge a Trust outside of the probate process.
The convenience of a Revocable Trust cannot be under-stated. Often the most difficult task in a probate is trying to figure out what assets exist, where assets are located, and the fair market value of every single possession. Assets are sometimes hidden in the backyard, in safes, safety deposit boxes, online accounts, including digital assets, personal possessions from silverware to guns to 4-wheelers. It is a challenge to get a firm grasp on your own assets, much less the assets of Deceased person who is no longer available to provide the treasure map.
Louisiana law requires that joint accounts be frozen upon the death of a joint account holder, including spouses! While an "allowance" is available for a surviving spouse, the prospect of avoiding frozen joint accounts is paramount.
Banks and other financial institutions rarely question the powers of a Trustee, but often question the powers of an Agent designated under a Power of Attorney. For this reason, it is sometimes prudent to designate someone as a Co-Trustee to help you manage assets held in trust, rather than rely on a Power of Attorney.
If any of the above Revocable Trust Benefits makes sense to you, then a Revocable Trust may be a good fit for you, but keep in mind some of the myths set forth below.
The Settlor of a Revocable Trust can take back assets transferred to a Revocable Trust at any time and for any reason. For this reason, all the assets are available to satisfy creditor claims. Medicaid is a creditor just like any other creditor. For this reason, all the assets contained in a Revocable Trust are "countable" for Medicaid purposes, which will prevent the Settlor from qualifying for Medicaid. Creating a Revocable Trust does NOT start the five-year lookback period. An Irrevocable Trust is necessary to start the 5-year lookback period for Medicaid qualification.
Creating a Revocable Trust is the first step to avoid probate, but three other steps are necessary. First, all probate assets must be retitled in the name of the trust. This is referred to as trust "funding." Second, non-probate assets, such as life insurance, annuities, and other assets that are governed by beneficiary designation, should be integrated with the terms of the trust to ensure your beneficiary designation reflects your wishes. Third, the trust must be maintained, which means that assets you acquire after forming the trust must be properly titled in the name of the trust, or in a way that will achieve your objective of avoiding probate.
Whether you need a simple trust, or require higher level estate planning to attain more complicated goals, we provide comprehensive, experienced representation. Properly planning and protecting your estate is a necessary step to protect for your family or loved ones in the event of death or incapacity. If you have questions about Revocable Living Trusts, or any other estate planning topics, please contact our office to schedule a free consultation, or use the link below to schedule your Free 15-Minute Call with an experienced Revocable Trust Attorney.
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