Consider revocable living trusts when doing estate planning

Among a number of estate planning tools are revocable living trusts (RLTs), which are created during your lifetime and, as the name implies, able to be revoked or amended whenever you wish. When does using a RLT make sense and why? We talked to three attorneys to find out.

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“When utilized appropriately, RLTs can be an efficient method of distributing assets upon your death while also serving as a tool to manage assets during your lifetime in the event of physical or mental incapacity,” said Brett W. Zielasko, Esq., CTFA, vice president and senior fiduciary officer at Nottingham Trust – a division of Community Bank N.A.

A potential benefit of an RLT Zielasko points to is that they can provide more privacy and discretion than traditional distributions through a last will and testament.

“In many jurisdictions, the Probate process is a matter of public record — this means that what you direct in your Last Will and Testament in regards to who gets your assets and in what amounts, is publicly disclosed information available to anyone,” he said. “On the other hand, RLTs can allow you to accomplish those same asset distribution goals in a much more private and confidential manner.”

Zielasko also notes that an RLT can provide an effective solution when planning for potential incapacity later in life.

“When creating a RLT the grantor (trust creator) is typically able to serve as the initial trustee and maintain full control of the RLT assets,” he said. “However, with effective legal guidance, the RLT can be drafted in such a way that other individuals and/or entities (like bank and corporate trust departments) can step in and assume responsibility for managing and distributing the RLT assets in the event that the grantor suffers from a physical or mental incapacity.”

One of the biggest appeals of RLTs is that they can help avoid the sometimes-lengthy probate process upon your death and more efficiently distribute your assets to your intended beneficiaries.

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“Even the most uneventful probate proceedings can result in assets being distributed to the intended recipients months or even years after your passing,” Zielasko said. “A properly drafted RLT can allow for assets to be transferred within days and weeks rather than months and years.”

Some of this is dependent on location.

“In Monroe County in particular, because our surrogate court is well staffed and they streamline things pretty well, probate is not usually a lengthy process,” said David P. Shaffer, Esq., partner and Chair of the Family Wealth and Estate Planning Department at Woods Oviatt Gilman LLP. “But that’s not the case everywhere. Downstate because of caseload and because of staffing it can take a long time to probate a will, even if everyone’s on the same page.”

For all of the positives of RLTs, Shaffer said, one of the potential downsides is that they are only as good as the assets that are titled in the name of the trust.

“Even for clients who are knowledgeable and who get good advice and follow that good advice, you can still run into a problem,” said Shaffer who gives the example of someone who sets up an RLT, later changes banks and names herself as the bank account owner and not the trust. “A year later she passes away with a hundred thousand dollars in that bank account and her name and we’re in probate.”

Shaffer has found that for most clients who come to him curious about living trusts and motivated purely by a desire to avoid probate, it’s not always the best fit.

“If probate avoidance is the goal, a revocable trust is not the only solution,” said Shaffer who notes there are assets that do not pass through a will. “Many people have quite a few non-probate assets without having a revocable trust, for example, an IRA, a 401k and a life insurance policy. Those are all examples of assets that have a beneficiary designation listed right on the account, so that when a person passes the person as listed as beneficiary on the account without the will  gets that money.”

Fundamentally, he says RLTs are good options for some families – especially in certain areas of the state where there’s a backlog at surrogate’s court – by that “the T’s have to be crossed and the I’s have to be dotted, not only in terms of the, the trust document itself, but also the follow-up.”

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Martin W. O’Toole, Esq., partner, and leader of the Trusts & Estates practice at Harter Secrest & Emery LLP has seen the popularity of RLTs grow slightly over the past decade.

“If I had to put a percentage on it, I’d say ten years ago maybe five percent of my clients were opting for revocable trusts, now it’s maybe fifteen,” he said. “But when I’ve got clients in New York City or Long Island or Westchester County that percentage will shift [up]. That’s not to disparage those courts – but just don’t process probate proceedings as quickly as those in upstate  New York.”

Generally, O’Toole does not see living trusts for clients with minor children because they need to name guardians for said children in the will.

“Revocable living trusts are of greater interest for individuals who are fairly well settled in their work and financial lives,” O’Toole said. “So, you’re tending not to see them done before clients are in their sixties, and generally, it’s still relatively rare for folks in their sixties. It’s typically people in their seventies and eighties.”

When it comes to any type of estate planning, O’Toole says nobody bursts through the doors of their estate planning attorney with a song in their hearts because, as part of this process, you must confront your own mortality and debility and the mortality of loved ones.

“Procrastination is baked into this process,” O’Toole said. “It’s important to emphasize to folks that regardless of whether it’s a will or trust, drafts are utterly irrelevant for purposes of transferring titles or putting someone in charge of administering assets.”

The information provided herein is for general informational purposes only and does not constitute legal advice. This guidance should not be relied upon as a substitute for professional legal counsel. Legal obligations can vary based on jurisdiction, specific circumstances, and changes in laws, regulations, or interpretations that may affect the applicability of this information. Readers are strongly encouraged to seek independent legal advice or consult with qualified legal counsel to address their specific legal needs when it comes to estate planning.

Caurie Putnam is a Rochester-area freelance writer.

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