Establishing a revocable living trust has several advantages over alternatives such as: (1) doing nothing and passing without will or trust, (2) having a will, (3) a joint tenancy with right of survivorship, or (4) gifting assets while the person is alive.
Disadvantages of Passing Intestate (Without a Will)
If you have assets and die without a will, that person’s estate has to go through the probate court process. Normally all assets that would have passed through a will go through the probate process where the court applies the intestate succession laws passed by the Florida Legislature to determine which of your closest relatives, if any, will inherit from your estate. If you have minor children at death, the court will determine their guardians and control their inheritances. Going through probate has several disadvantages as it can be expensive, is a public process that can take between 9 months to 2 years, and involve the court making decisions about your family’s affairs that might have been different from what you would have preferred.
Disadvantages of a Will
Having a will allows a person to determine who will inherit their estate. However, all wills have to go through the probate process. In the event a person becomes mentally incapacitated while they are alive, the court will still have to step in to determine who will be appointed that person’s guardian even if they left a will.
Disadvantages of a Joint Tenancy with Right of Survivorship
If you have property which is owned with another person as a joint tenancy with right of survivorship and you die, the surviving joint tenant will take that property. Because of this unique feature of a joint tenancy, even a person with a will could find that a joint tenancy could defeat the objectives of their will with respect to the property which is joint owned in this manner. Further, having joint owned checking or savings account with another person – such as a child – can expose your accounts to that child’s creditors.
Disadvantages of Gifting Assets or Property While Alive
If a person gifts assets while they are alive they lose control over that asset once it is given away. If the person gifting the asset finds themselves in financial difficulty in the future, there is no way to get back an asset that was given away as a gift. Further, a gift to a child who is married could have to share in that gift if they divorce. Similarly, once the gifted asset is transferred, for example, to a child, it could be exposed to that child’s creditors. Finally, there could be federal gift tax consequences to consider.
Advantages of a Revocable Living Trust
With a revocable living trust, the trustmaker avoids probate, it prevents a court from controlling your assets if you become incapacitated, and because is revocable, the trustmaker has complete discretion to change or revoke the trust. Further, depending on the size of your estate, a revocable living trust could reduce or eliminate estate taxes due upon death.
If you want to learn more about revocable living trusts, feel free to give our office a call.