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Pros and Cons of Revocable Living Trusts

More Than Avoiding Probate

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When considering whether or not to include a Revocable Living Trust as part of your estate plan, you'll need to understand the pros and cons of using a trust instead of a Last Will and Testament.

Pros of Using a Revocable Living Trust

  • Avoiding Probate - This is probably the biggest advantage of using a Revocable Living Trust. Why subject your loved ones and your property to the restrictive rules of probate when you can easily avoid it with the use of a fully funded Revocable Living Trust? This is particularly important if you own real estate in more than one state because without a trust, your loved ones will be faced with two or more probate proceedings. A Revocable Living Trust will also give your loved ones almost immediate access to cash during a difficult time. Compare this with the time it takes to open a probate estate and gain access to your bank account (anywhere from a few weeks to several months), and the value of a Revocable Living Trust to your loved ones will be priceless.


  • Avoiding Guardianship or Conservatorship - This is an advantage of using a Revocable Living Trust that's often overlooked. Why subject your loved ones and your property to the restrictive rules of guardianship or conservatorship when you can easily avoid it with the use of a fully funded Revocable Living Trust? After following the trust provisions for determining your incapacity, your loved ones will be able to take over control of your trust assets without interference by a judge. Aside from this, the value that a Revocable Living Trust offers to your loved ones in avoiding guardianship can be more than the value created by avoiding probate. Why? Because probate will only last for a fixed period of time (usually a year or two at the most), but guardianship can last for five, ten, or even twenty years.


  • Keeping Things Private - As required by state law, probate is a public proceeding. This means that anyone can go to the court house and take a look at each and every probate file being stored there. For example, if I've been hired by the beneficiary of an estate that's already been opened, then I'll just go down to the court house and take a look at the probate file. Not once has the court clerk asked me why I need to look at the file, and I've even asked the clerk to make copies of specific documents or the entire file and she hasn't batted an eye. In fact, in some jurisdictions you can look up court dockets and filings online. Contrast this with a Revocable Living Trust - it doesn't need to be filed with a the court, so it won't become a public record for everyone to see, while anyone can read a Last Will and Testament that's been admitted to probate.


  • Forcing You to Get Organized - It still amazes me how many people don't really know what they own or how their property is titled. When you set up a Revocable Living Trust, you'll be required to fund your assets into it, and this, in turn, will force you to find account statements, stock certificates, corporate minutes, car and boat titles, and deeds to real estate. And this will continue to benefit you in the long run because once you've taken the time to get organized and fund your trust, you'll stay organized and it will be easy for you to understand how your property is titled - in the name of your Revocable Living Trust.

Cons of Using a Revocable Living Trust

  • Up Front Costs are High - In general, it will cost more time and money to set up and fund a Revocable Living Trust than it will to simply write a Last Will and Testament. But in the long run the overall time and money spent on the trust will be lower. Why? Because the trust will allow your loves ones to avoid a costly court-supervised guardianship if you become disabled and a costly court-supervised probate proceeding after you die. Aside from this, the trust will benefit your loved ones by allowing them to avoid all of the emotional costs associated with guardianship and probate.


  • Funding a Trust is a Pain - Once your trust has been signed, you're not done - you'll need to contact your banks, investment and insurance companies, and transfer agents to change account and stock ownership and update beneficiaries; issue new stock certificates or assign partnership or LLC interests for closely held businesses; retitle cars and boats; and sign and record new deeds for real estate. For many people, this is the major drawback to using a Revocable Living Trust - if it's not fully funded, then it's really not worth any of the money spent on it. The type of assets that you own and what will need to be done to get them funded into a Revocable Living Trust should be carefully considered before you decide to use a trust.


  • You'll Still Need a Last Will and Testament - The previous drawback, Funding a Trust is a Pain, leads right into the next one - you'll still need a Last Will and Testament even though you've taken the time to create a Revocable Living Trust. Why? Because if you get frustrated or side-tracked or you simply don't have enough time and your trust is only partially funded when you die, then you'll need a special type of Will, called a Pour Over Will, to "catch" your unfunded assets and "pour" them into your trust. And what's so bad about that? Your Pour Over Will must be probated, which is another reason why funding your trust is so important and a factor you'll need to consider when deciding if you should use a trust since you'll still need a will anyway.


  • There's a Longer Time Limit Allowed for Contesting a Trust vs. Contesting a Will - Most states have specific statutes that dictate who can challenge a Last Will and Testament and how long they'll have to challenge it (usually only 30-90 days). Contrast this with contesting a trust, which was, at least until recently, a wide open court proceeding subject only to state specific statutes of limitation (usually 1 - 5 years, but sometimes longer). Lately, however, quite a few states have decided to close this gap by enacting specific laws that severely restrict the time frame for challenging a trust. For example, in 2007, Florida enacted a statute that limits the time to challenge the terms of a Revocable Living Trust after the Trustmaker dies to six months.

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