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by Kristin L. Brown
Clients who are contemplating their estate plan often assume that they need nothing more than a will, and they are often skeptical when presented with the idea of making a revocable trust rather than a traditional will the centerpiece of their estate plan. Many people mistakenly assume that trusts are only appropriate for ultra-wealthy individuals who need complex tax planning. In reality, a revocable trust offers a multitude of benefits for nearly every type of client.
Reduction of Texas Probate
If a client fully funds his or her revocable trust during life, there is a strong possibility that there will be no need for probate following the client’s death. Although the Texas probate process is relatively simple, there is still value in saving the time, court costs, and attorneys’ fees associated with it, especially when probate court dockets across the state are as congested as ever. Even if probate cannot be avoided altogether, muniment of title proceedings are much more likely to be an option for the estate of a decedent who had the bulk of his or her assets in trust. Probating a will as a muniment of title allows the persons handling the estate to forgo the requirements of an independent administration, such as providing various notices to creditors and beneficiaries and preparing an Inventory, Appraisement, and List of Claims.
Elimination of Ancillary Probate
While failing to avoid Texas probate is unlikely to have dramatic consequences, the same cannot be said for states like California, where probate is notoriously costly and time-consuming. For clients who own property in other states, eliminating the need for ancillary probate is critical. A client who places his or her out-of-state property in a revocable trust will ensure that there is no need for probate proceedings in a potentially unfavorable jurisdiction. In our increasingly mobile society, it has become commonplace for our clients to move to other states. While clients should still seek a review of their estate plan by local counsel after a move, a client with a fully-funded revocable trust will, in any event, have a significantly lower risk of subjecting his or her estate to a costly probate process.
Many clients prefer that their friends and family not know the exact details of their estate plan, especially if they opt to disinherit certain relatives or provide for them in disproportionate amounts. Once a will has been filed for probate, it is part of the public record and available for inspection by virtually anyone with internet access. A revocable trust, in contrast, is not required to be filed with the court, so a client can protect his or her privacy by including all of the key dispositive provisions of the estate plan in a revocable trust instead of a will. In conjunction with the revocable trust, the client will also need to execute a pour-over will that provides for all of his or her directly held assets to pass to the trust post-death.
Ease of Management
A Texas will signing ceremony requires two witnesses, a notary, and several steps that inevitably manage to befuddle some unsupervised testators and even the occasional attorney. Even when done correctly, sometimes it is simply a hassle to execute a new will or codicil when all a client wants to do is make a minor change to his or her plan. Amending a revocable trust, however, requires at most a notarized signature. There is often no need for the client to sign a trust amendment in the attorney’s office.
Continuity of Management
As more people are living longer, the need to plan for incapacity is more important than ever. A revocable trust, especially when funded, is an excellent tool in this regard. Should a client become unable to manage his or her own affairs, a new trustee can step in and immediately begin managing the trust for the client’s benefit, potentially avoiding the need for a guardianship proceeding. While a Durable Power of Attorney has traditionally served a similar purpose and is still an important part of an estate plan, it may be deemed unacceptable to a financial institution due to the age of the instrument or its policy requiring that its own form be used. Conversely, financial institutions are typically more receptive to dealing with successor trustees, making a revocable trust a more dependable guardianship alternative in most cases.
Kristin L. Brown is an associate at Davis Stephenson, PLLC