Do Revocable Living Trusts Really Avoid Probate?
By Patricia Louise Nelson of Two Spruce Law
We often tell people that having a revocable living trust can result in avoiding probate on death. But is that really true? Technically, it is true. But it depends on whether the person creating the trust transferred all of his or her assets to the trust or otherwise named beneficiaries for all of their assets.
It is important to bear in mind that when we create an estate plan that includes a revocable living trust, there are two phases to the estate planning process. The first phase is working together to craft documents that are unique to the client and meet the client’s needs. Phase one of the estate planning process is completed when we meet to sign documents.
Phase two of the estate planning process begins at the meeting where we sign all the documents and continues for the life of the person creating the trust. Phase two consists of placing assets in the trust and/or naming beneficiaries for items such as retirement accounts and life insurance.
There is a debate among estate planning attorneys about whether revocable trust can really be used to avoid probate. The gist of the argument, as I understand it, is that clients do not really read estate planning documents. In my experience, clients do read their estate planning documents. They often have very good questions about the minutia in documents.
Another argument is that clients do not really understand their documents. Again, that is not consistent with my experience. While clients may not understand all of the legal nuances of their trust, they do understand how a trust works and when it is important to get help.
The third argument against trusts is that clients will allow assets to slip out of their trust over time or will fail to “fund” the trust – that means transfer all their assets to the trust. This can definitely be a weak point. I work hard to coach my clients on making sure their assets get into the trust in the first place and stay there for the long run. We provide written instructions to clients at the signing meeting that tell them how to make sure different types of assets get into the trust or have beneficiaries designated.
We also encourage them to set a reminder on their smart phone to check in once a year to see if anything has happened in the past year that could cause a probate. We encourage you to read the letter of instructions. If, after reading your instruction letter, you still have questions about an asset, please call us. The instruction letter has evolved over my 29 years of practicing law due to client questions and experiences. We are here to help you. Give us a call.
