Four Ways a Revocable Trust Can Benefit Retirees

Imagine walking into a store and asking the salesperson whether you need a phone. The salesperson would answer confidently: “Of course, you need one! The only question is which one you will buy.”

Unfortunately, this can be expected from many estate attorneys. No matter who you are or what your situation is, the attorney will likely advise you on getting a revocable trust. 

A revocable trust often makes sense. Here are four reasons why a revocable trust may fit your situation:

Avoiding Probate

When clients insist they need a trust, it’s generally because of a good or bad experience they had because of a trust or lack thereof. A parent had a trust, and things passed very smoothly. Or their parents didn’t have a trust, and they had to deal with the probate courts in a challenging jurisdiction. Either that or a targeted Facebook ad saying they should have one.

Probate avoidance is a reasonable basis to set up a trust. If you pass assets through your will, they will go through probate. Probate is a court-supervised process of distributing the decedent’s assets, which can be expensive and time-consuming, depending on the jurisdiction.

If you own assets in multiple states, this can be especially important. My office is in Virginia, but I can see D.C. and Maryland from my office window. Suppose I own a rental property in Maryland and die; in that case, my family will go through probate in Virginia and ancillary probate in Maryland. However, a revocable trust that owns both properties solves that problem.

Maintaining Control

It is more common than not to have kids who will do very different things with the same inheritance. The standard way that revocable trusts control this challenge is to release a certain percentage of assets once the beneficiary hits a certain age. While this is most common, other ways exist to solve the problem.

Along with the advantage of control is flexibility. My current trust limits payouts to an annual maximum equal to the amount my beneficiaries save.

Ensures Privacy

Creating an estate plan can be a very emotional process. Ideally, there will be little disagreement among the participants, and you will develop a plan to execute your wishes. You typically keep your wishes private except for sharing them with those with some role or benefit in the plan.

If you plan to pass assets through a will, remember that it will most likely become public once the probate estate is closed. If you left one of your kids out, left another a bit more, or are just a private person, you may be better off with a trust.

Plan For Incapacity

Unfortunately, the scenario that no one expects or wants does occur sometimes. If your bank accounts are titled only in your name, this can become a nightmare for simple tasks like paying your bills. A revocable trust won’t improve your situation but can create continuity and simplicity in handling financial matters.

Should you become incapacitated, name a successor trustee who will manage assets to the terms outlined in the trust; this can happen immediately rather than going through the legal process of seeking guardianship or conservatorship.

Final Thoughts

While these are four solid reasons for drawing up a living trust, this is a one-size-fits-all answer, and you should proceed with caution as they are not necessarily for everyone.