7 Reasons a RLT is better than a will

TOP SEVEN REASONS 

A REVOCABLE LIVING TRUST IS BETTER THAN A WILL

1)   Avoidance of Probate

In North Carolina, the probate process can take months before assets can be distributed to beneficiaries. (Please see Willett Legal’s article on the Probate Process in North Carolina). Only after administrative costs, taxes, and debts of the estate have been paid and all administrative procedures have been completed may the personal representative distribute the remaining estate assets according to the will. 

With a properly funded revocable living trust, the probate process can be avoided altogether. In a revocable living trust, your assets are either re-titled to the name of the trust or the beneficiary designations on your accounts name the revocable living trust as the beneficiary. Your beneficiaries can then receive their distributions from the revocable living trust immediately upon your death.

2)   Organization of Assets

Oftentimes, loved ones are left searching for assets, such as life insurance policies, bank accounts, or deeds. A properly funded revocable living trust requires you to organize your assets for your family members. By funding – or placing your assets into your trust-  you get to identify and organize your assets so that your loved ones are not scrambling upon your death.

3)   Protection for Beneficiaries

A revocable living trust has a mechanism – oftentimes called a Supplemental Needs Trust provision – is a contingent trust that can protect your beneficiaries should they need protection if they were to become disabled. A spendthrift provision in the trust may also protect your beneficiaries in the case of divorce, bankruptcy, or lawsuit. 

4)   Retention of Control Over Assets

I oftentimes see a parent who tries to prepare their estate by deeding property to their children or adding a child to their bank account. This creates a situation where the parent losses some or all control of their assets. Instead, the parent should consider using a revocable living trust to preserve the step-up in tax basis, saving their beneficiaries potentially thousands of dollars, and retain control of their accounts.

For instance, by leaving the real property to a child in a revocable living trust, the child will “inherit” the property and receive a step-up to the tax basis of the real property’s current value. The revocable livig trust also ensures your accounts are not exposed to your child’s creditors or divorce. 

5)   Planning for Special Needs Beneficiaries

For parents with children with disabilities, a revocable living trust has a mechanism which can funnel your assets into a Special Needs Trust at your passing. The parent may name a Trustee who will manage the special needs child’s inheritance in a manner that will ensure the special needs child is taken care of after the parent has passed. By creating this third-party Special Needs Trust, any government benefits can be preserved and the funds in the Special Needs Trust can supplement the special needs child’s welfare. 

6)   Avoidance of Conflicts Among Heirs

Sometimes family members do not get along when the time comes to divvy up a parent’s estate. A revocable living trust requires a parent to think about their estate plan and then execute documents that clearly identify the parent’s wishes. This allows the parent to discuss their wishes with the children while the parent is alive, removing the element of surprise for the children. 

7)   Dealing with Blended Families

These days, more families are in second marriages but have children from a prior marriage. In this situation, oftentimes Husband and Wife will leave all assets to the spouse and then to the children. Therefore, the children of the first spouse may receive no inheritance. Upon the first death, the spouse receives all assets. Typically, that spouse provides for just their children, leaving the other spouse’s child no inheritance. 

A revocable living trust can ensure that both sets of children receive equal shares of assets or assets in a manner that both husband and wife deem appropriate for their family.