A RLT is for YOU
I learned a new acronym recently: BLUF. Bottom Line Up Front. I understand this is a military communications tactic intended to require speed and simplicity in reports and emails. The idea is to put the most important details first. I’ll give you an example. BLUF: A RLT is for YOU.
Yes, a Revocable Living Trust (RLT) is an excellent estate planning document for you to include in your overall estate plan. Does it seem too broad to assume that this idea applies to all readers? It’s not. This trust is a common estate planning tool that helps clients avoid probate, acts as an incapacity tool, and clearly outlines what a client wishes to happen to their assets and personal property when they pass away.
Probate is the legal process by which a decedent’s assets are administered, whether there was a valid Will or not. It’s a common misconception that having a Will avoids this court managed process. The Probate process includes, but isn’t limited to, filing the Will, appointing an Executor, collecting assets, recording those assets on a formal inventory, paying bills, filing taxes, preparing accounting(s), and distributing assets to heirs. This process occurs over a minimum timeline of eight months and requires several fees, including the 1.25% (Sussex County) probate fee calculated from the total value of the decedent’s assets.
In Delaware, the threshold for when probate is required is very low, being triggered when a person individually owns $30,000 or more in assets and/or real estate. Those thresholds apply to most of our community. In other words, most of our community can anticipate their loved ones will experience the lengthy timelines, publicity, and expense of the probate process at their passing. This reality is unknown and unintended by most.
The solution? Clients who wish to make the settling of their affairs faster and easier use a Revocable Living Trust to replace their traditional Will. The RLT is created with the client(s) as the initial Trustee and with language that thoroughly describes how their assets should be distributed at their later death. With the RLT established, the client(s) and their trusted advisors retitle their assets into the name of the RLT, similar to the process that a woman follows to change her last name after marriage. At the client’s death, their assets are titled in the name of the RLT, rather than in their individual name(s), allowing the estate to avoid the probate process entirely and be privately administered by the terms of the Trust.
Out of state assets, like real estate, can also be included in a DE resident’s RLT, avoiding probate in DE and in the other state(s).
All good Trusts include a succession of Trustees; the most trustworthy, prudent, and reliable people the client can name to carry out their wishes when they can no longer act for themselves. This succession of Trustees can step up into the role of acting Trustee during the creator’s incapacity.
A common example is the creator of a RLT is diagnosed with dementia and it’s no longer possible for them to make sound legal and financial decisions. Their successor Trustee(s) could step into the role of acting Trustee(s) and begin managing the Trust assets on the creator’s behalf and per their wishes. This seamless transition ensures that the creator of the Trust is still supported by their own monies without a delay in access to funds. It also creates the opportunity for the successor Trustee(s) to do strategic asset protection planning if health care concerns warrant the need.
When clients pass away their successor Trustee(s) assume the responsibility of carrying out the wishes within the document. These wishes might include leaving a legacy to family and friends, benefitting charity and religious organizations, taking care of pets, and more. The RLT and accompanying documents allow details of what should happen to personal possessions, too. Just like a traditional Will, parents of minor children can include a nomination of guardian(s) within the Trust document.
It’s true that we’ve met a few clients over the years who’ve had the opinion that they don’t care about what happens after they pass away, or how complicated and expensive it is, because they won’t be here. That opinion is okay, too. Otherwise, a RLT is for YOU.
