If you have been considering creating or updating your estate plan, you may have heard of alternatives to leaving everything to your loved ones in a will. But do you need a revocable living trust? Understanding how to use this estate planning tool can help protect your assets and ensure your loved ones have what they need after you are gone.

What is a Revocable Living Trust?

A Revocable Living Trust is a type of estate planning document that can be used in place of or in addition to a Last Will and Testament. Each word of the title can help you understand what it is, and how a Revocable Living Trust works:

• Trust: A trust places funds, assets, and accounts under the control of a separate legal entity (the trust) under the care of a trustee (usually you during your lifetime) the interest and principal of those trust assets can be used for specific purposes, and distributed to named beneficiaries at appropriate times, as dictated by the trust documents.
• Living: A Revocable Living Trust is created while the grantor (you) are alive for you and your spouse's benefit during your lifetime. Your intended beneficiaries generally (but not always) do not receive any distributions until after you have passed away.
• Revocable: You can make changes to your trust at any time, adding or taking away assets, changing beneficiaries, or even closing it altogether if your situation changes.

A Revocable Living Trust is a useful estate planning tool because it gives you, the grantor, a great deal of control over when, how, and to whom your assets are distributed.

The Benefits of a Trust over a Will

Trusts are an important tool because they offer significant benefits over a Last Will and Testament or the intestate succession laws Michigan probate courts use to distribute estates without a will. Many people find a Revocable Living Trust is better suited to their estate planning needs than a will because:

Avoiding Probate

One of the main reasons to create a trust is to avoid sending your family to probate court after your death. Because trust assets belong to the trust and not the deceased, they do not count toward your probate estate after you die. Using a Revocable Living Trust, you can greatly reduce, if not eliminate, your loved ones' need to go through the lengthy and costly probate process, getting them access to your assets sooner.

Trusts are Private

Unlike a Last Will and Testament, a Revocable Living Trust never becomes part of the public record. Your trustee administers your assets without court supervision. The courts only get involved if a beneficiary raises a complaint or there is some ambiguity in the trust documents that can't be resolved through mediation. If confidentiality is important, a Revocable Living Trust can keep your assets out of the public eye.

A Revocable Living Trust Provides for Your End of Life Needs

A Last Will and Testament only provides for how your assets will be divided after you pass away. It has no effect at all while you are alive. If your health declines and you become incapacitated, your loved ones may need to come to probate court for a guardianship or conservatorship to handle your care and provide for your financial needs.

But a Revocable Living Trust (paired with a Durable Power of Attorney and healthcare directives) can fill that gap. Trust documents list successor trustees who step in when the initial trustee becomes incapable of serving in the role. This allows for a seamless transition. Should you become unable to handle your own affairs, your successor trustee will be able to use the trust's assets to provide for your end of life care.

Revocable Living Trusts are More Flexible than Other Estate Planning Options

There are also irrevocable trusts (including special needs trusts) that can be created. However, these trusts are rigid. Once they are created, the grantor loses control of the funds, which are permanently earmarked for a specific purpose. There are benefits to an irrevocable trust in certain circumstances (such as when a special needs child is receiving state benefits). But usually, the flexibility of a Revocable Living Trust allows you to live your life while retaining control over your assets.

A Revocable Living Trust is also more flexible than a Will because it allows you to tailor when and under what circumstances assets will be paid out. While a will distributes assets to anyone over the age of majority (18 years old) at the close of the probate process, you can draft your trust to pay out over time, or under the supervision of the trustee, giving your beneficiaries time to grow up, meet certain milestone (such as marriage or college graduation) and make better financial choices with their inheritance.

Revocable Living Trusts Can Control Out-of-State Property

If you own a vacation home or time share out of state, your family could be facing more than one probate process after your death. Often probate courts cannot distribute real property located somewhere else. But if that property is deeded over to a trust, then there is no need to start an ancillary estate administration in the state where that property is located. This streamlines the process and avoids additional probate costs.

The Down-Side to Creating a Revocable Living Trust

There are many benefits to using a Revocable Living Trust in your estate plan, but not everyone needs one. Establishing and managing a Revocable Living Trust can be complex and requires careful documentation and accounting. Also, because you continue to control your assets (unlike in an irrevocable trust) there are no immediate tax benefits or creditor protections for assets held in trust.

Not all trusts are created equal either. For a Revocable Living Trust to truly work, it needs to be tailored to your needs, life goals, and financial circumstances. You should avoid AI-generated or pre-packaged trusts that may not account for Michigan-specific laws or your particular situation. Instead, you should work with a skilled estate planning attorney to determine if a revocable living trust is the right estate planning option for you.

Find Out if You Need a Revocable Living Trust

At Bebout, Potere, Cox & Bennion, P.C., we care about you and your family. We help individuals and families in Rochester Hills, Rochester, Troy, Lake Orion, Oxford, Oakland County, Macomb County and throughout Southeast Michigan. We can help you understand your estate planning options, and decide if you need a Revocable Living Trust. Call us at 248-651-4114 or contact us here to speak to an attorney.