In this edition of Sandy Spring Financial News, I will discuss the four reasons why Revocable Living Trusts are frequently used as an estate planning document.

1.  Control and flexibility

 A Revocable Living Trust is created by the client during their lifetime and may be changed or terminated (revoked) by the client through the use of Amendments.  A nice feature of Revocable Trusts is that the client controls the assets that are held within the Trust and can change the language of the Trust at any time during his or her lifetime.  This control provides the comfort and assurance of knowing that the plans are not set in stone.  However, by maintaining control the downside is that the assets held within a Revocable Living Trust are included in the client’s estate tax calculation at their death.

2.  Coordination of Assets

As mentioned earlier this year in a discussion of Wills, these instruments may not control as many assets as one might expect when joint accounts and beneficiary designation accounts are factored in.  One nice feature of a Revocable Living Trust is that a client can place many assets within the Trust and then have one document control the distribution of these assets at death.  This coordination can ensure the wishes of the client are carried out and the assets are transferred to the proper beneficiaries.

3.  Avoidance of Probate

The word Probate comes from a Latin word meaning to prove.  Each State has a Probate process to handle an individual’s estate settlement using the Will.  A Revocable Living Trust is a Probate avoidance strategy that allows the Trustee of the Trust to disburse assets to beneficiaries without those assets flowing through the Probate process.  This can save time and expenses.  The complexities of Probate proceedings and the costs associated with the process vary by state.  Your estate planning attorney can explain how beneficial avoiding Probate might be based on where you live and the type of assets you hold.  If you own real estate in other States, a Trust can also prevent an auxiliary Probate proceeding in those States.

4.  Incapacity Planning

A Will only handles assets at death.  A Durable Financial Power of Attorney is required to handle assets if you are incapacitated during a period of illness.  A Trust can handle assets both at death and during illness.  The Trustees named in the document can step forward to handle the Trust assets if the client has an incapacity or illness.  There are many different ways to accomplish this such as naming an individual, or a Corporate Trustee such as Sandy Spring Bank, as a back-up or successor Trustee with provisions in the document stating under what circumstances the Successor Trustee can act.  The client can also name a Co-Trustee who can act at any time on the assets just as a co-signer on a checking account can sign checks at any time.  Your attorney can describe the different Trustee, Co-Trustee and Successor Trustee designations, and recommend the best option for you.

Sandy Spring Bank’s Trust Division can be named as a Trustee of a Revocable Living Trust as well as provide support to individual Trustees.  If you have any questions on how we can help you with your Revocable Living Trust, feel free to contact me at 301 785-4112 or at pfish@sandyspringbank.com.