When it comes to deciding whether or not you should set up a Revocable Living Trust as part of your estate plan, you'll need to understand the three main benefits that a Revocable Living Trust offers over a Last Will and Testament. Here they are:
#1 - Keeping Your Estate Plan PrivateProbate is a court-supervised process that requires the filing of all probate documents with the local probate court. This makes each probate pleading a part of the public court records that anyone can read, including your Last Will and Testament, a list of your beneficiaries and assets, and a break down of who's getting what and how and when they're getting it. Contrast this with a Revocable Living Trust - it's a private contract between you as the Trustmaker and Trustee, and so it doesn't have to be filed with any court clerk. That is, unless a lawsuit is required to settle your trust after your death if, for example, your beneficiaries and successor Trustee don't get along or if someone wants to challege the validity of your trust.
#2 - Planning for Mental DisabilityOne of the main benefits of a Revocable Living Trust that's often overlooked is the ability to build mental disability planning right into the trust. The trust can specify how your mental incapacity should be determined, how you should be taken care of if you do become disabled, and who will be able to manage your property as your Disability Trustee. This will keep you and your property outside of a court-supervised guardianship or conservatorship. But a word of caution: Not all Revocable Living Trusts are created equally. Some that I've reviewed don't address mental incapacity at all, while others offer minimal disability planning. Be sure to request that your Revocable Living Trust includes a comprehensive disability plan.
#3 - Avoiding ProbateAvoiding probate is by far the most recognized benefit of a Revocable Living Trust and usually the one that convinces the majority of people to set one up. How does a Revocable Living Trust avoid probate? It's simple - if your assets are titled in the name of your trust at the time of your death, then they'll avoid probate. But on the other hand, assets left out of your trust at the time of your death will have to be probated. Aside from this, in some states probate may be necessary even with a fully funded Revocable Living Trust in order to limit creditors' claims and/or challenges to the validity of the trust or choice of successor Trustee. But the other benefits should outweigh these potential drawbacks.
Can a Last Will and Testament Offer Any of These Benefits?The answer is NO. A Last Will and Testament that's admitted to probate becomes a part of the public court records and therefore offers no privacy at all; it only goes into effect after you die, so mental disability planning is out of the question; and any asset titled in your individual name at the time of your death, or any life insurance policy or retirement account that doesn't have a beneficiary who survives you, will require probate. Contrast this with a Revocable Living Trust which offers all of these benefits, and the decision to use a Last Will and Testament or a Revocable Living Trust should be an easy one.