Four Reasons to Establish
a Revocable Living Trust
By Kathryn Cockrill • The Law Office of Kathryn M. Cockrill, LLC
A Revocable Living Trust is one of many estate planning tools that can benefit you and your family in the event of death or incapacity. The Revocable Living Trust is an agreement you create for your own benefit during your lifetime. Once established, the Revocable Living Trust may take ownership of your assets (with the exception of qualified accounts). With a revocable trust, you maintain complete control over the trust and may amend, revoke or terminate the trust at any time. It often is referred to as a “Will substitute,” because in order for a Last Will and Testament to be valid, it needs to be admitted to probate court and the Personal Representative (executor) has to adhere to the rules of the court. The Revocable Living Trust does not go to court but will effectuate transfer of property upon your passing. So why establish a Trust?
Managing Property During One’s Lifetime
A Revocable Living Trust can help answer the difficult question of how to manage one’s assets when age or illness prevents continued personal supervision of those assets. Because the Trustor’s assets are transferred to the Trustee, the Trustee has both flexibility and discretion in dealing with those assets.
Because a Revocable Living Trust requires the person establishing the trust (the “Trustor”) to transfer ownership of his property to a Trustee, no property remains at death to pass through probate, since probate only pertains to individually-owned assets. As a result, a decedent’s property held in trust can usually be made available to benefit the trust beneficiaries more quickly than property passing through probate pursuant to a decedent’s will. In South Carolina, probate takes about a year to a year and a half to complete, and the probate court will assess fees against the estate based on the value of the estate. Not only is probate time consuming in South Carolina, it can also be very expensive depending the value of the assets subject to probate. Also, assets are frozen during probate.
Probate court in South Carolina is a court of open record. This means that any person can access a complete copy of the probate file. Contained in the file will be the deceased person’s closest living relatives, death certificate (including cause of death), Last Will and Testament, and a list of all assets that are subject to probate with their respective valuations. The use of a Revocable Living Trust hides the nature and beneficiaries of a person’s estate, as the Revocable Living Trust and the valuation of trust assets are not recorded in court.
Asset Protection After Death
Depending on how the individual trust shares are established for the beneficiaries upon the Trustor’s death, the Revocable Living Trust may add an extra layer of protection for such beneficiaries. For example, if a beneficiary is over 18 but still too young to manage a large sum of money, the distribution can be set up to provide for such beneficiary until he or she reaches a certain age (e.g. 25 or 30 years old). If a beneficiary has a drug or alcohol issue, the Trustor may set up terms whereby the beneficiary must submit to a drug or alcohol test prior to receiving any distributions under the Trust. If a beneficiary has a creditor problem, the Trustor may name a third-party Trustee to manage the money for the beneficiary – if set up correctly, this type of trust will prevent the creditors of the beneficiary from attacking the principal of the Trust. If a beneficiary is on government assistance, the Trustor may set-up a special needs trust (or supplemental needs trust) for the beneficiary so that the government assistance is not suspended for the beneficiary.
Kathryn Cockrill is the Owner and Attorney at The Law Office of Kathryn M. Cockrill, LLC