You may have read articles written on the need for disposition of your assets at death under a will and revocable trust agreement, rather than a will alone. You may have attended a talk or seminar on the issue. You may have heard from friends and/or family that you need a “Living Trust” (terminology often used to mean a revocable trust agreement). The decision is a personal one which calls for a number of considerations. These considerations can include the following:
- Do you own out of state real property?
If property owned outside the state of the owners’ residence is held in the joint names of spouses and that state recognizes a right of survivorship between the married owners, the property will vestin the surviving spouse at the first death. Anadministration proceeding in the other state will not be needed to vest ownership in the surviving spouse. If the property is held in the owner’s individual name, an estate administration proceeding will be needed in that state in order to clear title to the property and vest title in the beneficiaries the owner names in his or her will. If the real property in titled in the name of a revocable trust during the owner’s lifetime, title to the property will pass at the owner’s death to the beneficiaries named in the trust agreement without the need for an administration proceeding in the other state.
- Do you have concerns about others reading the provisions of your estate plan after your death?
Your will is a public document which is filed with the Clerk of Court in the county of your domicile at your death. Anyone can request a copy of the will from the Clerk. If the main dispositive provisions of your estate plan are stated in a trust agreement rather than in your will, only the trustee, the beneficiaries of the trust and the taxing authorities will be entitled to receive a copy of the agreement and review its terms. Often, a bank or brokerage firm holding assets of the trust will ask for a copy of the document, but a trust certification or copies of the first and signature pages of the agreement, along with the powers provisions, should satisfy such a request. If the account holder of a retirement plan designates a trust as a beneficiary of the plan, the company holding the plan will be entitled to and should receive a copy of the trust document.
- Do you seek to avoid the payment of probate costs to the Clerk for supervision of passage of your property to beneficiaries under your will?
Probate costs are not imposed on assets which pass by beneficiary designation in a revocable trust agreement (unless the estate if the designated beneficiary) or by joint ownership with right of survivorship. You can title other assets such as stocks, bonds and cash in the name of the trustee of a revocable trust agreement and have those assets escape the probate process and the associated costs of $4 per $1,000 of personal property, with a maximum cost of $6,000 assessed on such property. If the saving of probate costs is an important goal for you, remember to weigh the costs of preparing a will and revocable trust agreement against the probate costs you are saving by not using a will alone.
- Are you directing the payment of retirement plan benefits to a trust created under your estate plan?
If so, you may choose to name a trust under a trust agreement as the beneficiary of a retirement plan instead of naming the trustee of a trust under your will. Companies to whom you submit your beneficiary designation are often more comfortable with the first option. Also, it is easy to forget the designations you have made to a trust created under your will when you sign a new will. You may be more conscious of the need to change beneficiary designations when you amend a revocable trust agreement.
- Are you willing and able to fund the trust during your lifetime?
If not, your assets which are not held in the trust at your death must pass under your will AND through probate in order to get to the trust where the direction to your trustee to distribute to your beneficiaries is made. The retitling of a brokerage account in a trust name is easy to effect. Your social security number is used as the tax reporting number for the account. If, however, you hold numerous certificate shares which you are unwilling to consolidate in a brokerage account held in the trust’s name, the transfers of those certificates to your trust’s name can be burdensome. Also remember that certificates of deposit cannot ordinarily have a change of ownership (to the trust’s name) made on them until their term is up.
Your estate planning attorney will assist you in making the choice of which format to use. Be cautious not to be swayed by the choices of family, friends or neighbors in regard to their own estate plans
since every financial and personal situation is different.