PFM3093: ESTATE PLANNING

The Advantages and Disadvantages Revocable

Living Trust In Estate Planning

Lecturer: Left Col Encik Mohamad Ali Roshidi

bin Ahmad

NAME: NURUL HIDAYAH BT MOHD ZAIDI

Matric No: D20171079476
Introduction

A trust is a fiduciary relationship that allows a third party or trustee to retain assets on behalf
of a client or receiver. Trusts can be structured in various ways and can decide how and
when the properties are passed on to the beneficiaries exactly.

Since trusts typically skip probate, the beneficiaries can gain access to these assets quicker
than they will to assets that are passed through a will. Additionally, it may not be considered
part of the taxable estate because it is an irrevocable trust, and less taxes will be due upon
your death.

Also, assets in a trust can move through probate, save time, court costs and theoretically
could property taxes as well.

About the topic

A Revocable Living Trust Defined

A revocable living trust, also known simply as a revocable trust, is at the most basic level a
written document that specifies how your assets will be treated after you die. Assets may
include properties, financial assets, bank accounts, and savings.

You build it during your lifetime as with all living trusts. (There are also testamentary trusts
which do not take effect until after you die.) Upon your death, the assets you put in the trust
are then transferred to your chosen beneficiary. That sets apart a revocable living trust is
that the terms can be changed or revoked at any time. Hence in its name the word
"revocable.

The person who creates a trust is the trustmaker. You'll also see the words, confidant and
grantor. The trustee usually is often the trustee of a revocable living trust. The trustee is the
person who oversees a trust's management- keeping track of income and tax returns. One
thing you'll do is appoint a successor trustee in your trust documents. He is the person who
retains the trust when you can't. The final word the beneficiaries are to use. They are the
persons, organizations, or other institutions that will obtain assets after your death from your
trust.
Advantage Of Revocable Trust

Avoid Probate

Assets kept in a trust escape probate because the trust does not itself expire with its creator
legally named the grantor or trustee. The trust remains up and running after its grantor's
death, and it can transfer its property according to the grantor's terms to anyone provided by
the grantor in the formation documents of the trust. There's no need for judicial oversight or
intervention

Probate protection is perhaps the biggest advantage of a revocable living trust.2 When you
own real estate in more than one state, that may be an especially valuable factor as in this
situation your loved ones will face two or more probate proceedings when you simply left a
will. Each property should be checked where it is located

The revocable living trust will also allow your loved ones nearly unlimited access to cash
during a tough time.4 Usually, your loved ones will not be able to access your bank account
until a probate estate has formally been opened. Ask yourself how they will be paying up to
this time for funeral costs and other required expenses.

Avoid Guardianship or Conservatorship

Living trusts revocable are not just about death. This will help your loved ones to escape
both an expensive court-supervised guardianship if you are disabled and an expensive
court-supervised probate proceeding after you die.

If you are incapacitated, your loved ones and your properties will be subject to the restrictive
laws of guardianship or conservatorship.5 6 Creating a revocable living trust means
appointing a successor trustee, someone to step in and administer the trust for you when a
time comes when you are no longer able to take care of your personal affairs.

After following the provisions of your trust for determining your incapacity, your successor
trustee can take possession of your trust assets without court intervention.

Keep Things Private

A probate is a public event. Anyone, including your will, can go to the courthouse and take a
look at any document filed there. And in some states, outsiders can look up court dockets
and lawsuits online. Everyone will see the magnitude of what you owned to give to someone,
so they will find out who gets everything when probate is opened so your will is deposited in
the court.

Trust records are never filed with a judge, and they will not become a record for the public.
Disadvantage Of Revocable Trust

Funding a Trust Is Expensive And a Pain

In general, setting up and maintaining a revocable living trust takes more time and resources
than merely writing a will — so much as three times more, at least initially. But in fact, the
cost can end up being very comparable, since the probate also costs money. The value will
have to be applied for a reasonable contrast to the cost of writing a will.

After you shape it, you need to create new deeds and other documents to transfer control of
your properties into the trust. You'll need to get in contact with your mortgage, savings,
insurance firms and transfer agents. You will have to change control of the account and
stock and amend the beneficiaries. We need to issue new stock certificates. We need to
retitle cars and vessels.

This is the main downside of using a revocable living trust for certain people, but if the trust
is not completely funded, it's not worth the time, energy, and effort to build one. Once you
agree to use this estate-planning method, you will carefully consider the type of assets you
own and what will be done to get them transferred into the trust.

You'll Still Need a Will and an Estate Plan

When you accumulate new assets and fail to transfer them into the trust, the trust can only
be partially funded when you die. Forgetting to move the title to newly acquired properties
into your trust can be shockingly easy as time goes by.

In this scenario, you will need a special form of is called a pour-over will to "bury" your
unfunded money. At the time of your death the will "pours" them into your confidence, as the
name implies. It will have to be checked for your pour-over, but it can still be an invaluable
worst-case backup tool.

Furthermore, a trust can not own any of the properties. This includes other pension plans
and assets that you can keep together with someone else. For example, if you own it as a
joint tenant you can not pass ownership of your half of a house to your trust. You may need
an alternative way to transfer control of these properties, but if you use the beneficiary
classification, you will still escape probation.

Your Heirs Have Longer to Contest a Trust

Many states have unique laws that govern who may contest a testament, and for how long.
The length of time can be as low as 30 to 120 days.
Contrast that with contesting a living trust that was only subject to state-specific laws of
limitation until recently as a wide-open court case. Typically these laws are one to five years,
but they are much longer at times.

The Bottom Line

If you are concerned with something as important as estate planning, it's best to talk to a
legal professional. You are going to want to make completely sure you grasp all the pros and
cons of your decisions. This article is intended to communicate general knowledge and does
not relate specifically to your specific concerns. It's not formal guidance. You'll need an
attorney for that.
Conclusion

The primary advantage of establishing a revocable trust is that it offers a prearranged

process that will guarantee your assets 'continued protection and survival should you
become disabled. It may also set out all the details of your estate plan for disposal. Because
of reforms in the tax code, most revocable trusts will now be considered for federal income
tax purposes as part of a decedent's assets. Consequently, certain post-tax benefits that an
estate enjoys, including the right to record its profits on a fiscal year basis, are now granted
to a revocable trust rather than a calendar year basis.

Revocable trusts aren't for everyone. Whether a revocable trust is suitable for you and your
beneficiaries is heavily dependent on your individual needs and circumstances. Although the
benefits of creating a revocable trust usually outweigh the disadvantages, the decision to
establish a revocable trust is complicated and involves a detailed legal review taking into
consideration all of the above considerations as they affect each person and family.