Revocable & Living Trusts Elder Law
A revocable trust, sometimes called a “living trust” is a will substitute that accomplishes many of the same goals outlined in our discussion on wills. Assets in the trust pass to the beneficiaries of the trust upon the death of the grantor of the trust. The grantor retains the right to access the trust assets throughout his or her life. Because the grantor retains unfettered access to the trust assets, these assets are considered available in the nursing home context and from an elder law planning perspective, are of little value. In our experience, the primary reason most people select the revocable trust instrument is for the stated purpose of avoiding the cost and delay associated with their perception of the probate process.
In many instances, we see the revocable trust instrument as a neutral solution, in that our clients pay us up front to pre-administer their estate by transferring all of their assets into the revocable trust. So long as the client is vigilant in keeping all of the assets in the revocable trust throughout his or her life, upon death, their assets will avoid probate. Too often, we see clients establish revocable trusts and fail to make sure all of their assets are transferred into the trust. Upon their death, a probate proceeding is then required, undermining the goals established at the outset of the planning process.
Some advantages of creating a revocable trust may include:
- Avoiding having to administer an estate in two jurisdictions if, for example, a person owns property in New York and Florida
- Making it more difficult for a child or spouse to contest the distributive scheme set forth in the trust
- Maintaining privacy as it relates to who receives the trust estate
- Reducing some of the costs associated with administering an estate
Some of the disadvantages include:
- The costs of establishing a revocable trust compared to less expensive alternatives, such as holding an account jointly between spouses
- The costs associated with transferring all the assets into the trust
- The requirement that all existing assets remain in the trust and that all newly acquired assets are transferred into the trust
- The modest charge required to keep and maintain the trust for the balance of the grantor’s life
- More complicated rights of creditor claims, creating some ambiguity as to the successor trustee’s personal liability
- The practical challenges of becoming familiar with operating or managing assets as a trustee, instead of as an individual