- What a Revocable Living Trust Can and Can't Do For You
- March 23, 2016 | Author: Jeanette M. Dostie
- Law Firm: Suisman Shapiro Attorneys-at-Law - New London Office
A revocable living trust (or RLT) is a widely used estate planning device, often promoted in magazine articles and at seminars. There is no doubt that individuals and couples can achieve substantial benefits, both tax and non-tax, through the use of revocable living trusts. It is important, however, that people considering making a revocable living trust part of their estate plans have a clear understanding of what the revocable living trust can and cannot accomplish.
Some of the benefits that can be realized through the use of revocable living trusts are:
- Any assets titled in the name of the Trustee of the trust upon death do not need to pass through probate.
- People who own real estate in multiple states may avoid having their estates conduct probate proceedings in each state by titling the real estate in the name of the Trustee during life.
- A revocable living trust can provide a mechanism for managing assets in the event of lifetime incapacity. The Settlor (person who established the trust) of a revocable living trust will designate a person or financial institution to assume the duties of Trustee in the event the Settlor is unable to manage his or her finances.
- If privacy after death is a concern, a revocable living trust may help alleviate that concern because a revocable trust does not become part of the Probate Court’s public file after the death of the person who created the trust.
As useful as a revocable living trust can be to accomplish your estate planning goals, there are some things that it cannot do for you:
- Transferring assets to a revocable living trust will not protect those assets from your creditors during your life. Further, most revocable living trusts have language directing the trustee to pay the Settlor’s just debts after death.
- The RLT does not shield trust assets from the costs of long term care, such as nursing home care. Everything in a revocable living trust is considered available to pay for nursing home care.
- A revocable living trust will not prevent assets from passing through probate unless the assets are transferred to the revocable living trust during the life of the Settlor. Assets that are not transferred to the trustee during life may pass through probate, unless those assets are payable to a named beneficiary or owned jointly in survivorship.
- A revocable living trust will not reduce the size of your gross taxable estate. Everything in your revocable living trust will be part of your gross taxable estate when you die. Estate tax savings may be realized as part of your estate plan due to provisions contained in the revocable trust instrument, though, such as gifts to a spouse or charities.
- The revocable living trust will not reduce the statutory fee that your estate must pay to the Probate Court after the death of the Settlor. Connecticut statutes set forth the Probate Court’s fee schedule based on the size of the gross taxable estate, and the Probate Court does not have the power to deviate from the fee schedule.
- Even if you transfer all of your assets to a revocable living trust, you will not be able to completely avoid contact with the Probate Court. Your trustee or executor will be required to file at least a Connecticut Estate Tax Return after your death.