Whereas the ultimate objective of a will and a revocable living trust is the same, there are a few technical differences between the two. However, due to the gravity of these technical differences, it is always recommended to hire an attorney for setting up a revocable living trust.
When it comes to making decisions involving your estate planning, the use of a revocable living trust is often preferred and recommended over creating a will document. But have you ever considered why you hear this thing so often from your attorney or other individuals?
And while we do not deny the fact that a revocable living trust certainly holds some advantage over a will and puts your and your heirs’ interest in a better and favorable position, there are still a few things that you need to know about before deciding which is more appropriate in your case.
What is a revocable living trust?
A revocable living trust, a revocable trust, or a living trust are a few terms that mean the same thing.
A revocable living trust means a trust (fiduciary relationship) that is created during the lifetime of a trustor. A ‘trustor’ or ‘grantor’ is the person who creates a trust.
The purpose of creating this trust is to appoint another person, known as a ‘trustee’, to look after and manage the assets and properties of the trustor that are being held under this trust. And like any other trust, all this is done for the benefit of a third party known as a ‘beneficiary’.
Being called a revocable living trust means that the trust can be revoked or amended by the grantor at any time during his life.
If revoked, everything held under the trust will go back to the trustor. This quality of a revocable living trust is the reason why such trusts do not have estate tax exemptions like in the case of an irrevocable living trust.
Difference between a will and a revocable living trust
To understand the difference between a will and a revocable living trust, it is important to understand how a living trust works.
A revocable living trust is under the fiduciary duty of a trustee who has the responsibility and the authority, as mentioned in the trust agreement, to take necessary actions to protect the interests of the beneficiaries of the trust.
Just like in the case of a will, all the assets and properties held under the revocable living trust are to be transferred to the beneficiaries in the event of the grantor’s death or him becoming incapacitated.
However, the thing that differentiates a will from a revocable living trust is that the transfer of assets here is direct and can avoid the lengthy process of probate. This difference is one of the most highlighted factors which explains why creating a revocable living trust should be preferred over a will.
Hiring a revocable living trust lawyer
It is not at all necessary to hire a lawyer for the creation of a revocable living trust. This is because a trustor can himself fulfill all the conditions of it and create one on his own.
Still, there are a few technicalities that may arise at some later point in a trust created by a non-professional person. Thus, to deal with any such underlying issues, hiring a revocable trust attorney from the beginning and in between should always be considered.
Where can a revocable living trust attorney help you? – Things you need to know about
There are some things where sorting legal advice in the case of your revocable living trust may become mandatory and prove to be helpful. These are –
Trustor wants to add certain conditions
A trustor might want to add certain specific conditions that decide when the assets and property should under the trust be distributed between the beneficiaries or till when should the trust continue to support the beneficiaries.
In such cases, taking legal advice from a revocable trust lawyer could greatly help in the proper structuring of such conditions.
Matters related to estate tax where trust contains AB or ABC planning
Property held under a living trust is not exempt from estate tax. Therefore, there can be instances when an estate tax return filing or payment becomes due. This may happen –
- If the revocable living trust contains AB or ABC trust planning and one spouse of the trustor dies, it becomes important to make sure that the trust is properly funded and any compulsory estate tax return, even when no tax payment is due, is prepared and filed.
- The value of your estate held under the trust exceeds the value that is exempt from federal estate tax. In such a case, an attorney will be needed to furnish tax returns, pay the necessary tax amount, and see how much the amount of tax can be reduced.
To check and make sure whether a trust is fully funded or not
A revocable living trust needs to be fully funded with the trustor’s assets. But there might be a slight deviation when transferring the required assets in the name of the trust.
Hence in the event of the trustor’s death, assets that are still in the name of the trustor alone will need to pass through probate.
A revocable trust attorney can help in making sure that the trust was fully funded from the beginning and also help avoid probate in case of an error.
Federal or State estate taxes and inheritance taxes
If the estate of the trustor is subject to federal or state estate taxes or inheritance taxes, a living trust lawyer can help in filing these tax returns and making their payments.
Matters related to businesses owned by the trustor
In the case of the trustor’s death, there will be matters related to businesses that he owned. To resolve such matters, a trustee might require the help of a revocable trust lawyer.
An example of such matters can be to make sure that the businesses of the trustor either continue to operate, get sold, or dissolved.
In case of dispute between beneficiaries and/or trustee
There can be a probable dispute between the beneficiaries or with the trustee over his conduct in carrying out his fiduciary duties under the revocable living trust.
In such a case, it will be mandatory to hire an attorney for a peaceful and possibly the most appropriate resolution of the disputed matters.
The appointment of an attorney is required by the state laws
A revocable living trust can be created by a trustor on his own. However, there might be a condition in the state laws requiring the appointment of an attorney to transfer specific assets or property to the trust from the trustor.
To avoid a conflict between your will and the trust
While doing it on your own, you might become confused about what should be placed under the will and the trust. This may arise certain conflicts between the two where the only way out would be to appoint an attorney.
So, to avoid any chances of such conflicts from the very beginning, hiring a living trust lawyer is the right way to proceed.
The above discussion makes it clear that there is more than one thing where a revocable living trust attorney can help you with, besides the commonly known practice of avoiding probate.
As a general suggestion, matters related to estate planning tend to have complexities that may exist inherently or arise due to the limited knowledge of the trustor.
Therefore, seeking legal advice throughout the process can save much trouble for everyone involved.