Revocable Living Trusts are commonplace today. These trusts are created during the lifetime of the trust’s creator (“settlor”) and name the settlor as the trustee and beneficiary. The settlor retains control over the assets and management, the right to income and principal, and numerous powers, such the right to revoke or amend the trust. Davenport Evans lawyer Mark R. Krogstad explained in a recent edition of Davenport Evans eNews.
As estate planning attorneys, we are often asked, “Should I have a Revocable Living Trust?” This leads to a discussion of a trust’s advantages and disadvantages. The most notable advantages of a Revocable Living Trust are probate avoidance and ease of administration during settlor’s incapacity.
Probate is the legal process for settling a decedent’s estate. Probate starts with an application or petition to the court to probate the will or determine the heirs and to appoint a personal representative. The decedent’s will and estate proceedings are open to the public. Once appointed, the personal representative provides notice to interested parties and creditors, inventories and values the decedent’s assets, files tax returns, pays taxes and creditors’ claims, files an accounting with the court, distributes the remaining assets to the heirs or devisees, and closes the estate.
With a properly funded Revocable Living Trust, there is no court involvement, unless a dispute arises, and the trust agreement and the trust administration are not open to the public.
The named successor trustee can immediately begin administering the trust. While funding the trust may add an initial administrative burden and some additional upfront cost, the administration of an estate in probate generally takes longer and is more costly than an administration through a Revocable Living Trust. This becomes more evident when a decedent owns real property in multiple states, which may require a probate in each state where property is located. Ultimately, clients who want to make administration easier for their families and want to save on the cost of probate are attracted to this benefit.
It is a fallacy that everyone needs a trust. But for many, a Revocable Living Trust provides a real benefit, decreasing complexity, cost and strain on a family. When preparing or reviewing an estate plan, one should speak with a legal professional to determine whether a Revocable Living Trust would aide in achieving his or her goals.
Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the State’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.dehs.com.