 Legal:
Thomas
M. Butz
Thomas M.
Butz is a Partner in the law firm of Smith Butz, LLC and
concentrates his practice in the areas of Estate and
Trust Planning, Estate and Trust Administration, Asset
Protection and Civil Litigation. Smith Butz, LLC is a
full service law firm located in Southpointe at 125
Technology Drive, Suite 202, Canonsburg, PA 15317.
Please call 724-745-5121 or visit the Website at
www.smithbutzlaw.com.
Revocable
Living Trusts
It seems
everywhere you turn these days, you see someone touting
the advantages of Revocable Living Trusts. Claims are
made that inheritance, estate and income tax benefits
can be realized through a Revocable Living Trust.
Avoidance of the probate process is also held up as a
reason to have a Revocable Living Trust.
Often times
you will see Revocable Living Trusts seminars advertised
in the newspaper or on television, promising tax
advantages for your estate and ease of distribution of
your property to your heirs. What these Revocable Trust
peddlers do not tell you, however, is that the tax
advantages they tout for the Revocable Living Trust can
be just as easily achieved through the use of a simple
Will at a significantly reduced cost to you.
A Revocable
Living Trust is a document that allows you to provide
for the management and distribution of your property.
Just as with a Will, the Trust is “revocable”, so
that you may modify it or terminate it at any time
during your life. The Trust is a writing that appoints a
trustee to administer your property and gives that
trustee instructions on how the property is to be
managed during your lifetime and distributed at your
death. A Revocable Living Trust document is typically
longer, more expensive and more complicated than a Will.
In addition, your property will need to be transferred
and re-titled in the name of the Trust during your
lifetime for the Trust to be effective. On the other
hand, a Will can typically be created for much less cost
than a Revocable Trust. The same provisions for the
distribution of your property at your death that are in
your Revocable Trust can also be in your Will. Finally,
with a Will, there is no need for you to reregister or
re-title any of your assets; they can remain in your
name until the time of your death.
Promoters of
Revocable Trusts also like to say that there are estate,
inheritance and income tax advantages to utilizing a
Revocable Living Trust. While this statement is true,
what the Revocable Trust promoters do not tell you is,
again, that whatever tax benefits that can be achieved
through utilizing a Revocable Living Trust, can also be
achieved utilizing a Will. There is nothing that makes a
Revocable Trust a more tax efficient device than a Will.
In most cases, all you achieve through utilizing a
Revocable Trust is increased cost and complexity. A Will
can provide the same result with much less aggravation
and expense. You should not set up a Revocable Living
Trust for the sole purpose of saving taxes.
A Revocable
Living Trust will allow property of the Trust to pass to
your heirs free of probate. Probate is the legal process
for transferring your property when you die. It is a
Court-supervised process and usually involves validation
of your Will and appointment of an Executor or
Administrator. After going through probate, your
property is then distributed to the beneficiaries under
your Will. A Revocable Living Trust does avoid the
probate process because your assets have been
transferred prior to your death to the Trustee of your
Trust. If, however, all of your assets are not
transferred into the Trust before you die, then the
remaining property will still need to go through the
probate process. While avoidance of probate in some
states, such as New York or California, is to be
desired, the probate process in Pennsylvania is not so
burdensome or expensive that using a Revocable Living
Trust just to avoid probate, in most cases, is not
warranted.
Supporters
of the Revocable Living Trust also point out that with
all of your assets being held by the Trust in the name
of your Trustee, if you ever became incapacitated and
unable to handle your own affairs, the existence of the
Trust would avoid having to appoint a guardian to
safeguard your assets. While this aspect of the
Revocable Trust is true, again, many of the Revocable
Trust salesmen out there fail to point out that a
Durable General Power of Attorney is a simple and
inexpensive way to avoid guardianship. This brief
inexpensive document appoints another individual as your
“Agent” to handle
your assets, and additionally, can also empower that
same person to make medical decisions on your behalf if
you become incapacitated. |
