Do I need a Revocable Living Trust?

A Revocable Living Trust (“RLT”) is a tool that can be used to facilitate the transfer of assets out of your name during your life. Why would you want to transfer assets out of your name? There are many reasons. One might be to avoid probate at the time of your death. With an RLT you can avoid probate in Georgia and other states where you might own property. Another might be to allow a certain degree of privacy about your estate and your plan that a Will cannot provide. Yet another is to give you input into the control of your assets if your capacity declines.

So how does an RLT work?

The “living” in Revocable Living Trust (“RLT”) means that the trust is created, funded, and used during the lifetime of the person creating and funding the trust (called the “Grantor”). Creating an RLT involves signing a specially written document. Funding is accomplished by changing the name on financial accounts from the Grantor to the name of the trust and by deeding real property, like land or homes, from the Grantor to an RLT.

In addition to the Grantor, two other people are involved in a trust: the manager of trust assets, called the “Trustee,” and the recipient of the assets, called the “Beneficiary.” With many RLTs, the Grantor acts as the initial Trustee and primary beneficiary and therefore retains control and access to the assets in the trust. In most cases, there may be little or no tax consequences when transferring assets into the trust. Since the trust is revocable, the IRS ‘looks through’ the trust and treats the assets as though they were still the Grantor’s for income and transfer tax purposes. While the RLT will not provide the same protections against creditors that irrevocable trusts might, it remains a useful planning tool.

Is this something I need?

The RLT can provide a very legitimate legal solution: avoiding probate. Having the trust own all your assets means you do not need a legal process to change title to those assets upon your passing. Your beneficiaries will obtain what you’ve left for them with less headache and administrative burden.

In some states, such as Florida, an RLT is a common estate planning document simply to avoid the probate process. Probate in Florida can be significantly more expensive and time-consuming than in Georgia. Some states require “ancillary probate” for someone who owns assets in that state but resides somewhere else. For example, a Georgia resident owning a vacation condo in Florida may have to probate their estate in Florida, as well.  This rule is applicable to ownership of assets in many other states, as each individual state has their own laws about transferring title at death.  But assets owned by an RLT can remove the necessity of multiple probate proceedings.

In addition to significantly reduced costs and time at death, an RLT offers a measure of privacy that is generally unattainable by Wills. At death, Wills are filed and become part of the public record, so they become searchable by anyone, including family members who may not be receiving as much as they expected. However, a Trust is a private document and does not become part of the public record. Privacy may be a desirable trait for your estate plan if, for example, you’ve decided to disinherit an heir.

The RLT can also be significantly beneficial to a Grantor who becomes incapacitated. Incapacity proceedings are some of the most common probate court proceedings as people are living longer into ages where physical or mental capacity diminishes. When you form and fund an RLT, you can name a successor Trustee to take over management of the Trust assets upon either your death or incapacity, entirely skipping the court process for doing so. This provides a seamless, and immediate, transition of control from you to someone of your choosing in the event you can no longer manage your affairs.

Whether avoiding probate, keeping your estate plan private, managing assets during your incapacity, or some combination, an RLT is one of the many tools the attorneys at Georgia Estate Planning & Probate can discuss with you. Reach out to us if you have questions or would like to schedule a consultation. We are here to help!