Two of the most common estate documents created today are the revocable living trust and the will. While they share certain similarities, they also differ in some very important ways. Let’s explore these two documents in further detail.
The Revocable Living Trust
One of the most important aspect of the revocable living trust (RLT) is that it is revocable. This means that the details can be changed at any point during the grantor’s life, and for any reason. It may sound like an obvious point, but a key aspect of this kind of trust is the flexibility it inherently contains for the grantor. The grantor is the person who is setting up the trust and placing their property into the trust.
Creating a trust also provides some peace of mind in case of the unexpected. The grantor is most often the initial trustee of the trust and controls their property as they always have. However, should the grantor unexpectedly fall ill or become unable to make decisions, it is often much easier for the successor trustee, who was chosen by the grantor, to step in and manage the grantor’s property as their fiduciary rather than relying on a power of attorney or going to court to seek a guardianship.
In addition, once the grantor dies, having the trust already in place means that the estate may be distributed more quickly than having to pass through probate process with the Register of Wills office, prior to going to beneficiaries.
Another attractive aspect of the RLT is that it’s available to anyone; a trust doesn’t require you to be a millionaire in order to use it for your estate. You can include as much or as little money or property in the trust as you wish. As long as the trust is funded, it can continue in existence. The best practice, however, is to move all of your money into the trust to avoid probate and allow it to be available to your successor trustee should you become unable to make your own financial decisions.
Similar to a Will, the grantor can name trustees to monitor and manage the trust on behalf of remainder beneficiaries and make wise investment or distribution decisions. Like in a Will, the grantor also names beneficiaries and what items or assets should be distributed upon death and in what circumstances.
Contrary to popular belief and advertising, an RLT will NOT save you estate or inheritance tax, though it may be used as a mechanism to make sure the exemptions you are entitled to will be protected. It also avoids the probate fee, which is based on the gross value of your estate. Often, the extra expense of an RLT is a wash when compared to the expenses associated with probate.
A major difference between an RLT and a Will is in their privacy protections. An RLT is not subject to probate, and so is not made a part of public record. For grantors who want to maintain privacy, either for the amount in their estate or for protecting the identities and distributions to beneficiaries, an RLT helps to maintain that privacy.
Similar to the RLT, a Will allows you to name beneficiaries and divide property upon your death. It also allows the testator (the term for the person writing the Will) to name a personal representative, which is synonymous with executor. A probate record is formed after the testator has died and the court has either made decisions decision regarding distribution of the estate or approved the distribution as set forth by the testator and proposed to be distributed by the personal representative. The testator’s Will and estate details are made public immediately upon the filing of the Will. These records are easily available, at a minimum in Maryland, on line.
Of course, this doesn’t mean that probate records are necessarily going to be searched by everyone. For instance, do you know anyone who goes and searches probate records on a whim? Likely not. But for those who don’t want their estate details to be a matter of public record, a trust provides those additional security protections.