Revocable trusts have become increasingly popular.

Uses

There are several uses of RLTs:

  • avoid probate

Benefits

An RLT is revocable. So, the grantor can change the terms of the trust or revoke it.

Downsides

An RLT must be funded.

An RLT doesn’t make wills obsolete; it simply makes “old-fashioned wills” obsolete. With an RLT, you still need a pour-over will to transfer any assets to the RLT that were not transferred while the decedent was alive.1 The pour-over will acts like a safety net. Ideally, no assets will pass under the pour-over will. Like all wills, a pour-over will must be probated, but if the RLT planning is done correctly, then the probate estate should qualify as a “small estate” that has a streamlined probate process.

Cost

Amending

Administering

After a spouse dies, part of the trust becomes irrevocable.

A “Good” RLT

Indicators of a good RLT include:

  • It covers all contingencies.
  • The client understands the document because: (1) It is organized, (2) It uses headings, and (3) the trust’s language is clear or there is a summary of the trust.
  • The client funds the trust; and if the goal is to avoid probate, then the client transfers all of the client’s assets to the trust.

Resources

Henry W. Abts III, The Living Trust: The Failproof Way to Pass Along Your Estate to Your Heirs Without Lawyers, Courts, or the Probate System (Revised and Updated Ed., 2003).

  1. In his very first bullet point on the cover of his book, The Living Trust (Revised & Updated Edition), Henry W. Abts III boldly asserts that “[t]he Living Trust makes the old-fashioned will obsolete.” Notably, Abts’ statement is limited to “the old-fashioned will.” This limitation makes sense because a pour-over will is still used with revocable trusts. So, revocable trusts don’t make wills obsolete. At best, they merely make “old-fashioned will[s] obsolete.” ↩