Advantages and Disadvantages
A Revocable Living Trust can be a usual estate planning tool under some circumstances. Not all estate plans however require that a Revocable Living Trust be created. The following is a discussion of the advantages and disadvantages of Revocable Living Trusts.
Management Of Assets: One of the most valid reason for creating a Revocable Living Trust is to provide a vehicle for the uninterrupted management of a person’s assets. For example, an individual of advanced age, or in poor health, with complicated financial assets to manage (individual stocks), or a person who doesnot want to manage their investments, may benefit with the preparation of a Revocable Living Trust. It should be noted however, that under some circumstances, a Power Of Attorney, especially in light of the newly enacted Power Of Attorney laws in Maryland, may be sufficient to manage assets.
Out Of State Real Property: If a person owns real property titled in their name in another state, a Maryland Court does not have the authority to transfer title of that property to legatees named in a Will or to heirs under Intestacy laws. It will be necessary for the Personal Representative of the deceased property owner’sestate to open an ancillary probate estate in the State where the real property is located. This can be time consuming and costly. If the out of state real property is titled in the name of the Revocable Living Trust, the need for an ancillary probate estate can be avoided.
Privacy: Unlike a Last Will and Testament, which upon the death of the Testator of Testatrix becomes a public record, a Revocable Living Trust setting forth the nature and value of the person’s assets and identifies the recipients of those assets, will not become a public record upon the death of the Settlor.
Potential For Will Contest: Where it is anticipated that someone may contest the provisions of a decedent’s Last Will and Testament, which as noted above is a public document, a Revocable Living Trust, may under some circumstances, provide better protection for a person’s dispositive plan, than that afforded by a Will.
Avoidance Of Probate: One reason that is frequently cited as a reason to create a RevocableLivingTrustistoavoidprobate, which isclaimed to be time consuming and expensive. While it is true that in some states the probate process long and complicated, this is not so in Maryland. For example in Maryland, sometimes a small estate with limited probate assets, can be opened and closed on the same day. Maryland also permits the filing of a “Modified Estate Administration”, under some circumstances, so that an estate may be closed within nine months of death. As for the expense of probate, the Register of Wills fees are minimal. For example, at the present time, the fee to open a probate estate with assets valued at up to $750,000.00 is only $750.00. The most expensive fee in probate administration is the combined commission which is permitted to be paid to the Personal Representative and an attorney who assists in the administration of the estate. Often however, the Personal Representative is a family member who does not claim a commission and some attorneys only charge for the time that they spend in administering the estate and not the entire commission. Furthermore, the combined fee which may be paid to the Personal Representative and Attorney may not exceed a certain amount in every estate, whereas there is generally no such limitation of fees for time spent by attorneys administering a Revocable Living Trusts.
Costs: It costs more to create and fund a Revocable Living Trust, than to have a Last Will and Testament prepared. With a Revocable Living Trust, you will also need to have a Will prepared which should provide that any property of the decedent which has not been transferred to the Trust during their lifetime will pour over into their Trust. A Power Of Attorney should also be prepared to address issues which are not usually addressed in a Trust. Additionally, to fund the Trust, you will need to prepare transfer documents and with real property, a new Deed must be prepared, and recording costs paid.
Tax Savings: A Revocable Living Trust does not save taxes, UNLESS the Trust contains some of the provisions which may also be included in a Will, for example, provisions utilizing the unified estate tax credit, the unlimited marital deduction, and charitable deductions.
Creditor Claims: Maryland law currently provides that any claim against a probate estate must be filed within six (6) months from the date of the decedent’s death. This law may change in the future to provide that the time period runs from the date of the appointment of the Personal Representative of the estate. However, with Revocable Living Trusts, the allowable period in which to file claims may be the length of the standard statute of limitations period of three or possibly twelveyears.
Presented By Valerie Rocco, in course entitled “Creating a Revocable Trust” presented on October 18, 2012, at Anne Arundel Community College.