By: Robert Harris, Oregon Estate Planning Attorney
When deciding on an estate plan in Oregon, many clients ask
about a revocable living trust as an option. There are a lot of factors to consider when deciding on whether a living trust is right for
you. It's very fact specific decision.
What is a revocable living trust?
It’s a written document that manages your property during your lifetime and distributes your property after your death. The document appoints a "trustee" (Usually yourself) to administer the trust property, and sets out detailed instructions on how the trust property is to be managed during your life and how it is to be managed or distributed after your death.
If you want your trust to substitute for a probate proceeding, which is one of the main reasons for establishing the trust, you must include trustee detailed instructions about handling distributions just like in a will. And you should make sure to transfer substantially all of your property to the trustee, otherwise you may end up both paying for the trust and a probate.
A revocable living trust agreement is usually longer and more complicated than a will, and transfer of assets to the trustee can be time-consuming. So setting up a trust is almost always more expensive than a will. Although establishing a comprehensive trust, and making sure it is tended to, can avoid the cost of a probate later on.
Advantages of a revocable living trust
Avoiding probate. Not only in your state of residence, but what many people don’t realize is that if you own real estate in several different states a probate proceeding may have to be filed in each state. A trust avoids this extra cost.
Avoidance of conservatorship. A revocable trust will avoid a conservatorship in the event of your incapacity and allows you, not a court, decide who is to be your conservator.
Efficient distribution. A revocable trust can reduce delays in distributing your property after you die. A probate will take a minimum of 5 months to complete and distribute. A well drafter trust can avoid this delay and distribute your assets to your beneficiaries much quicker.
Confidentiality. While a will must be filed in a probate, there is no court filing for a trust. So the terms of your living trust are confidential. Only your named beneficiaries and trustee having access to that information.
Continuity. A trust can provide continuity of management of your property after your death or incapacity for a period of time. So if you have minor children, or grandchildren, or a family with special needs, a trust can establish a management plan that will preserve your assets and avoid unnecessary waste or taxes.
Disadvantages of a revocable living trust
Expenses of planning. A trust is more complicated than a will to draft, and asset transfers can take time and can result in additional costs.
Expenses of administration. If you have a large estate, or if there are family issues, you may want to appoint a professional trustee. In that case, you will have fees to pay. Setting up a revocable living trust will not eliminate the need for professional services of attorneys and accountants in the future. When a trust terminates, it is still important to have an attorney and a CPA manage the termination and distribution.
Inconvenience. Once the trust is established, you must be sure that the financial statements of the trust are maintained and all assets that you may come to own in the future are transferred into the trust. Persons dealing with trust assets (such as banks and title insurance companies) will want to review the trust instrument to check on the trustee’s powers and duties.
Unforeseen problems. Revocable living trusts can raise a variety of new problems regarding the ability to borrow against property, title insurance coverage, real estate in other countries, Subchapter-S stock, certain pension distributions, and many other issues. Only a skilled attorney familiar with estate planning can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets.
Complexity. Revocable living trusts often are more complicated than wills and can leave you confused about an estate plan that will require your attention and management for an indefinite period of time.
Drafting the Documents
There are "paralegals", document drafting firms, legal zoom, and other similar service providers who market their trust services. Why not hire them?
All I can say is that if you have assets to protect, you should consider how much you're willing to risk in order to save the cost of hiring an experienced estate attorney. Tax laws change. Other tools like life insurance trusts, gifting, family LLC's and other means of managing an estate can be utilized.
I often tell clients that I don't need an electrician to change I light bulb. I personally don't need an electrician to change out a light switch. But I am not going to risk buring down my home by trying to run a new electrical line. I won't hire a handyman off of Craigslist either. I'll spend the money, and hire a licensed and bonded electrician who will do it right. My home is too important to me to risk.
Harris Law Firm offers a free 15 minute phone interview with an attorney. Just call 503-648-4777, and in most cases, you will talk to someone immediately. The attorney should be able to give you a quote for the cost of preparing your estate plan. And it may be less expensive than you thought.
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