One of the major benefits of a Revocable Living Trust is the protection it provides you in case of your incapacity, incompetency, and other physical or mental disabilities. If that were to happen, the person whom you name as your successor Trustee automatically steps in and handles your financial matters, according to your instructions. There is no need for hiring an attorney to petition the court to appoint a Conservator for your assets. Your hand picked successor Trustee can continue to manage your property and assets, without the court’s involvement. In short, a Living Trust avoids the necessity of a conservatorship of your estate. The successor Trustee has fiduciary duties to act in your best interest under the powers and duties you delineate in the Living Trust.
· Avoid Probate
In the event of your death, the person whom you name as your successor Trustee automatically steps in to handle your final affairs, pay off your creditors, and distribute the property in your Trust to your named beneficiaries. The successor Trustee could even be one of your beneficiaries to whom you are leaving your property. Thus, the handling of your estate could be reduced to the Trustee’s signing off on several documents which transfer your properties and assets to himself or herself as your beneficiary.
If you have properly transferred all of your properties and assets into your Living Trust, there is no need to probate your estate. By setting up your Living Trust you thereby avoid the necessity of probate altogether and avoid all the disadvantages of Probate. You should keep in mind that administeration of a living trust may still require consulting with an attorney and some administration fees. But unless you have established a trust which continues to operate over a period of time, Trust administration fees are generally substantilly less than Probate fees.
· Protection for Minor Children
Yet another advantage of a Revocable Living Trust is that after you have passed away you could continue to protect your minor children by providing for their financial needs until they reach certain age. Your Trust could provide for an appointment of a successor Trustee who will manage the properties and assets which you leave for your minor children until they reach the age of 21 or even 25. You name your successor Trustee in your Trust, while you are still alive. The successor Trustee could be a close family member who is also the guardian who is raising your children. After your death, the successor Trustee would hold your properties and assets in the Trust for the benefit of your children by paying for their school, health, and other living expenses. When your children reach the age that you have specified in the Trust, the successor Trustee would then give them the remainder of the assets in the Trust. You thereby can take comfort that your children would receive the bulk of their inheritance when they have come of age, and not when they are still a teenager (18 years old), as the law requires in absence of a Trust.
· Avoid or Reduce Estate Taxes (for married couple)
Without careful planning your children and other beneficiaries may have to pay substantial Estate Taxes on your estate. For married couples concerned about taxes to be paid by their children, one of the most important ways to reduce or possibly eliminate estate taxes is the use of a Credit Shelter Trust, also commonly known as a Bypass Trust. This Trust must be set up, however, while both spouses are still living.
The Bypass trust uses the Estate Tax Exemption amount for both spouses to double the amount of the tax-free estate which could be passed to your children or other beneficiaries. You can place assets equal to the tax exemption amount in a trust for your spouse, your children, and/or any beneficiaries you choose. Even if your spouse is a lifetime trust beneficiary, your children or final beneficiaries will pay no estate taxes on the distribution of the trust principal when your spouse dies.
Simple Wills Living Trust
John and Marry's Net Estate Value $1,000,000 $1,000,000
Amount of Probate Fees $45,000 $0
Amount of Estate Taxes $125,250 $0
Net Amount to Children $829,750 $1,000,000
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