ElderLaw News-The Estate Planning & Elder Law Firm, P.C. — MD, VA, DC
ElderLaw News
ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President., William S. Fralin, Esq., President.

Should I Have A Revocable Trust?

One of the most frequent questions that estate planners are asked is “Do I need a living or revocable trust?”

There are some estate planners who routinely advise all their clients to create living trusts for probate avoidance purposes. Underlying this advice is the assumption that probate costs are prohibitively expensive, and the courts something to be feared. On the other hand, we believe that the answer to the question should involve a more extensive review of a client’s personal circumstances and a hard look at the actual probate costs and expenses in the state in which the client lives. Additionally, there may be other ways to avoid probate that will satisfy a client’s needs and that do not necessitate the costs inherent in creating and funding a trust. There are certainly circumstances in which a more complex estate plan is desirable; however, sometimes a complex estate plan is more trouble than it is worth. A good estate planner will contemplate the problem from many angles, knowing that a revocable trust can be a great tool in the right circumstances and an unnecessary burden in others.

Revocable trusts are excellent tools for managing assets in the event of your disability. Once the asset is titled in the trust, the Trustee can manage that asset pursuant to the terms of the trust. In the event of the Trustee’s disability, there is a mechanism for having a successor step right into the prior trustee’s place. A revocable trust may also be indicated when there is a need or desire to protect assets for a beneficiary who may be unable to manage assets on his or her own or who has creditor issues or substance abuse problems. A revocable trust can also be used as a financial training ground for a younger generation as well. By involving the next generation of Trustee in the affairs of your revocable trust while you are living, you can explain and demonstrate your financial skills and values to them in a meaningful way, so that they are prepared to succeed you when the time comes. However, in determining whether to recommend a revocable trust, estate planners must take into account whether there are other probate avoidance measures that are available to you.

For a client whose estate plan primarily involves outright bequests to competent adults, it may be possible to structure your assets to avoid probate using transfer on death account designations, beneficiary designations and transfer on death deeds for real property. For many, the legal fees to create such an estate plan can be considerably less than the upfront cost of creating a revocable trust because much of the work can be done by the clients themselves. Particularly in the situation where your assets are relatively modest, a general durable power of attorney and advanced medical directive may be all the asset management that is necessary.

However, if any of the your beneficiaries are minors, have creditor issues, substance abuse issues or other problems, a trust which can protect the beneficiary may be very desirable and outweigh the costs associated with creating and funding a revocable trust. In thinking about whether to recommend a revocable trust for a client, one important factor should be an understanding of what estate administration would actually entail for a client. In Virginia, executors and administrators of estates are required to account to the Commissioner of Accounts for the administration of the estate for each year that the estate is open until it is fully distributed. Such review of the administration of the estate adds additional costs, and it is this annual administrative cost that can become burdensome in a small estate that, for one reason or another, is not able to be closed in a timely manner. Further, testamentary trusts are equally subject to annual review by the Commissioner of Accounts until terminated. Thus an estate plan that contemplates continuing trusts or an estate with a problematic asset may be a good candidate for a revocable trust in order to avoid the annual accounting costs. Again, the driving factor in thinking about whether a revocable trust is appropriate for you is very individually focused on your circumstance, your assets and how they can be best managed.

If you would like to discuss whether a revocable trust would be a meaningful addition to your estate plan, please contact the attorneys at The Estate Planning & Elder Law Firm, P.C. We would be happy to discuss the pros and cons of creating such trusts with you.


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The Estate Planning & Elder Law Firm, P.C.

The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors, omissions, or damages resulting from the use of the information in this newsletter. The Estate Planning & Elder Law Firm, P.C. thanks the law firm of Hook Law Center for their input to this newsletter.

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