What is a Revocable Living Trust?

When it comes to estate planning, one of the most popular tools is the revocable living trust. A revocable living trust allows individuals to manage their assets during their lifetime and ensure smooth transfer of those assets after death, without the need for a lengthy probate process. However, like any legal tool, it has its advantages and disadvantages.

At Burger Huyser Attorneys, we understand that making the right decisions about your estate planning is crucial.

Before diving into the pros and cons, let’s quickly explain what a revocable living trust is. A revocable living trust is a legal document created during an individual’s lifetime that allows them to place their assets into the trust. The individual, known as the grantor or settlor, can modify or revoke the trust at any time while they are still alive. Upon their death, the assets in the trust are distributed to beneficiaries according to the terms of the trust, bypassing the probate process.

Pros of a Revocable Living Trust

  1. Avoidance of Probate One of the biggest advantages of a revocable living trust is that it allows your assets to pass to your beneficiaries without the need for probate. Probate is the legal process in which a court oversees the administration of a deceased person’s estate. This process can be lengthy and expensive, often taking several months to years to complete. With a living trust, your beneficiaries can receive their inheritance much more quickly.
  2. Privacy Since assets in a revocable living trust do not go through probate, they do not become part of the public record. This ensures that your estate remains private, which can be a significant benefit if you want to keep your financial affairs confidential.
  3. Flexibility and Control As the grantor of the trust, you have complete control over the assets in the trust while you’re alive. You can amend, add, or remove assets, or even revoke the trust entirely if your circumstances or intentions change. This flexibility allows you to make adjustments as needed throughout your lifetime.
  4. Incapacity Planning A revocable living trust can also serve as a tool for managing your affairs if you become incapacitated. In the event of illness or disability, the successor trustee you appoint can step in and manage the assets in the trust without needing court intervention, such as a guardianship proceeding.
  5. Potential to Minimize Estate Taxes While a revocable living trust does not provide direct estate tax benefits on its own, it can be used in conjunction with other strategies to help minimize estate taxes for larger estates.

Cons of a Revocable Living Trust

  1. Initial Setup Costs Setting up a revocable living trust can be more expensive than creating a simple will. Legal fees and the costs of transferring assets into the trust can add up, making it a more expensive option initially. However, these costs may be offset by the avoidance of probate and the savings on probate fees in the long run.
  2. Ongoing Maintenance Unlike a will, a revocable living trust requires ongoing maintenance. You must ensure that all new assets are properly transferred into the trust. Failure to do so may result in those assets being subject to probate. This could involve updating the trust after major life events, such as purchasing new property, adding new accounts, or making changes to beneficiaries.
  3. No Protection from Creditors While a revocable living trust provides privacy and can help avoid probate, it does not protect your assets from creditors or lawsuits during your lifetime. Since you retain control of the assets in the trust, they are considered part of your estate and can be targeted by creditors.
  4. Does Not Avoid Estate Taxes A revocable living trust does not offer estate tax benefits by itself. The assets within the trust are still part of your taxable estate, which means they may be subject to estate taxes after your death. For larger estates, additional planning may be necessary to minimize estate taxes.
  5. Limited Protection from Incapacity While a revocable living trust allows you to designate a successor trustee in the event of your incapacity, it doesn’t offer the same level of protection as a durable power of attorney. If you become incapacitated and the successor trustee isn’t immediately available or recognized, the process may still require legal intervention.

Is a Revocable Living Trust the Right Option for You?

A revocable living trust offers several benefits, particularly when it comes to avoiding probate and ensuring privacy for your estate. It can also be a useful tool for managing your affairs in the event of incapacity. However, it’s important to weigh these benefits against the potential downsides, such as the initial cost and the ongoing maintenance required.

At Burger Huyser Attorneys, we understand that estate planning can be overwhelming, and we are here to guide you through the process. If you’re considering a revocable living trust or any other estate planning tool, contact us today to schedule a consultation and learn more about the best options for your unique situation.

Contact Burger Huyser Attorneys, and book a consultation.

To speak to one of our experienced attorneys in South Africa for immediate assistance, contact us on the numbers below:

Randburg call 061 516 6878; Roodepoort call 061 516 0091; Sandton call 064 555 3358;  Pretoria call 064 548 4838;

Centurion call 061 516 7117; Alberton call 061 515 4699; Bedfordview call 061 536 3223

DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE