Placing larger assets in a revocable living trust could simplify distribution.
Many people want to simplify their estate planning.
Their definition of a simple estate plan will guide what documents are included.
If simple means a basic estate plan, the individuals will likely opt for a last will and testament over a trust.
If they desire to make distribution of assets easier, sans probate, then they will likely opt to include a revocable living trust (RLT).
According to a recent Kiplinger article titled “What Assets Should Be Included in Your Trust?,” a RLT accomplishes this by skirting potentially lengthy probate proceedings.
However, the complexity and expense of probate can vary based on where you live.
For example, Kansas law applies a “reasonable fee standard” (i.e., fees must be “just and reasonable”) when it comes to attorney and personal representative compensation.
On the other hand, Missouri law applies what amounts to a “commission” schedule by default.
Consequently, in my experience, probate can be less expensive in Kansas than in Missouri, especially when the estate is well-organized going into probate.
A common misconception is merely creating a RLT with an experienced estate planning attorney and signing the documents allows one to avoid probate.
Not so fast.
Only assets used to fund the RLT while the grantor is alive or via beneficiary designation arrangements postmortem will bypass probate for distribution to RLT beneficiaries according to the specific instructions and conditions outlined in the RLT itself.
A RLT can be funded with a wide range of assets.
These can include real estate, life insurance policies, annuity certificates, business interests, financial accounts, and personal property.
Because a home tends to be one of the largest assets owned by an individual or couple, placing the house in a RLT can facilitate a simple transfer to heirs.
This is especially true if land, homes, or commercial properties are owned in a number of states.
One complicating factor could be if there is a mortgage on the property.
In some cases, the lender for the mortgage may resist real estate being retitled to a RLT.
You should discuss this with your lender prior to making changes, just to be on the safe side.
Transferring financial assets to a RLT may be easier.
Common financial assets transferred to a RLT are annuities, bonds, cash, certificates of deposit (CDs), checking accounts, savings accounts, money market accounts, mutual funds, non-retirement brokerage accounts, stock certificates, shareholder stocks, and safe deposit boxes.
A RLT should be created with an experienced estate planning attorney.
Once this step is done, you should work on funding your RLT.
Failing to do so can render your RLT worthless, when it comes to probate.
Rather, your assets will be distributed through probate, usually via a “pour-over” last will and testament executed right after your RLT.
Reference: Kiplinger (Jan. 16, 2022) “What Assets Should Be Included in Your Trust?”