For over a quarter of a century, the National Safety Council has recognized June as National Safety Month. An objective of National Safety Month is to raise public awareness of the top safety and health risks in the United States. One of the lesser known but considerable risks Americans and their loved ones face are the financial and emotional repercussions that can accompany incapacity or death. A revocable living trust is a legal tool that can keep you and your loved ones safe from the costs, uncertainty, and confusion that may result upon your incapacity or death.
A Revocable Living Trust Protects You
Like every person, you are at constant risk of suffering a disastrous accident or illness that may render you incapable of caring for yourself or your loved ones. Your incapacity could be temporary, or it could last until your eventual death. The total cost of incapacity, which may include lost wages and the cost of required medical care (if your incapacity requires assistance with the activities of daily living such as bathing, eating or dressing), is difficult to calculate. However, it can quickly become very costly: the average cost of assisted living in the United States in 2020 was $4,300 per month. That figure can double or even triple for those living in the Bay Area.
A revocable living trust protects you by providing instructions for how you and your loved ones are to be financially supported during your incapacity. A revocable living trust also allows you to choose who will handle your finances when you are unable to handle them yourself. Further, there is no better time than now to put a revocable living trust in place because the trust is revocable, which means that you can change your mind at any time and alter your trust as your life circumstances change, as long as you have mental capacity.
A Revocable Living Trust Protects Your Loved Ones
A revocable living trust also protects your loved ones. It provides specific instructions for what you want to have happen upon your incapacity or death, which means your loved one will not be left guessing what you would have wanted, or worse, have to look to state law to determine who should be given the authority to handle your financial and end-of-life affairs.
Estate administration fees vary widely by state, but they too can be very costly. In California, for example, where probate attorney and executor fees are set by law, the attorney and executor fees to probate a home worth $800,000 could be as much as $46,000. A revocable living trust, however, can avoid probate and the associated probate fees.
Another benefit of revocable living trusts is that they can remain private. Without the instructions contained in a revocable living trust, family members are often forced to resort to public court processes, which means that the court and other nosy individuals may be prying into your very private matters.
Further, a revocable living trust can provide basic marital deduction planning to maximize the use of your and your spouse's estate tax exemptions so that your loved ones do not face a large estate tax burden after your death. Finally, using a revocable living trust allows you to protect the money you leave to your loved ones from your beneficiary's creditors.
A Revocable Living Trust Must Be Properly Funded to Work
In order for a revocable living trust to work, it must be properly funded, which means that your property must be owned by the trust, or for certain types of property, the trust must be named as the beneficiary. If your revocable living trust is not properly funded, then a probate may be needed. For this reason, June is a great time to review any communications you have received from your attorney about the accounts and property that need to be owned by the trust or that need their beneficiary designations changed to name the trust.
Because the instructions contained in a revocable living trust are so vital, it is important that you review them each year to ensure that they still reflect your wishes and your situation. If you need to make any changes, please contact us, as we would be happy to help update your revocable living trust so that it works for you and your loved ones during incapacity and at your death.