Revocable Living Trust
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There has been a trend in recent years for individuals to avoid the expenses and delay of probate by implementing their estate plans through what is usually referred to as a "living" or "revocable" trust. Although this technique has been around for over a century, recent books and seminars on the subject have helped to popularize this useful estate planning tool.

The living trust is based on a very simple principle: Under our system of law, probate is necessary only when a person's assets stand in his name at the time of death. Once an individual has died, the only person who can transfer the decedent's assets is an executor or administrator acting under court order.

With a properly drafted and funded living trust, however, the assets held in trust upon your death will not require the appointment of an executor; neither will the assets be subject to costly probate proceedings. Rather, your successor trustee can carry out your instructions regarding the distribution of your property following death without court interference.

One attractive feature of the living trust is that you, as the creator (or "grantor") of the trust, have the power to amend or revoke the trust at any time during your lifetime. Thus, having a living trust does not require you to permanently part with use, ownership, or control of assets placed into the trust.

If you choose to implement your estate plan through a living trust, you should, generally, transfer all of your property into the trust so that when you die there are no assets in your name requiring probate administration. With a living trust, the functions usually carried out by an executor (asset inventory, tax return filing, and distribution of property to your beneficiaries) will instead be performed by the named successor trustee.

The use of a living trust does not reduce income taxes. Since a living trust may be revoked or changed by you at any time, the trust assets are treated as being owned by you for income tax purposes. As a result, income from trust property must be reported by you during your lifetime. Accordingly, the savings to be realized from a living trust are strictly probate expenses, expenses associated with incompetency proceedings and, in many cases, Federal Estate Taxes.

Estates valued at $1,500,000 or less incur no federal estate tax. What that means is that a husband and wife may, with a properly drafted living trust, combine their individual $1.5 Million estate tax exemptions to leave up to $3.0 Million to their heirs, free of estate tax. This translates into an estate tax savings of as much as $675,000. On the other hand, without proper planning, the $1.5 Million exemption of the first spouse to die may be lost. Single individuals may implement other types of planning strategies to ensure maximum benefit from their $1.5 Million exemption.


One of the principal advantages of the living trust is the avoidance of probate costs and delays. In Nevada, for example, where probate procedures are often cumbersome and expensive, living trusts are widely used by individuals with moderate to large estates. This probate avoidance feature also extends to persons owning real property in more than one state. In the absence of a living trust, a separate probate proceeding must be completed in each state where real property is located. By utilizing a living trust into which all out-of-state real property is placed, multiple probates can be avoided.

A living trust may also eliminate the need for, and expense of, incompetency proceedings, guardianships and conservatorships. Where a living trust is in place, in the event of incompetency, the co-trustee of the trust, or the successor trustee (if the grantor was acting as the sole trustee), simply assumes the management of the trust assets and continues to carry out the trust provisions without the expense and delay of a court-supervised guardianship or conservatorship.

A living trust can be extremely effective in averting a will contest. In most states, a will which is subject to probate can be contested on a number of grounds by heirs and beneficiaries named in the will. On the other hand, favorable legal presumptions which support the creation and administration of living trusts make a living trust more difficult to contest than a will.

A living trust may also be advantageous where an individual has significant real estate holdings. Generally speaking, the trustee of a living trust enjoys much wider latitude in entering into unconventional transactions than does a court-supervised executor. This administrative flexibility leads to a more efficient disposition of the grantor-decedent's real property.

The principal disadvantage of a living trust is that it is more costly than a simple will. In addition to its drafting, your living trust must be funded by the transfer of your investments (stocks, bonds, insurance, etc.) and real property to the trust. However, you can minimize the costs associated with the required transfer work by handling some or most of this work by yourself or with the assistance of brokers and insurance agents. Although a living trust can be more expensive initially, the peace of mind realized by avoiding probate and the possible estate tax savings achieved by implementing a trust will, in most cases, make the living trust a good investment.

You should update or change your trust if the following situations occur:

i)	there is a change in your marital status; the birth or adoption of a child;
ii)	there is a significant change in your financial status;
iii)	one of your beneficiaries dies; or
iv)	if there is a death or incapacity of a named trustee.

If you choose to implement your estate plan primarily through the use of a living trust, you can avoid the need for a lengthy will by using a “pour-over” will instead. A “pour-over” will directs any property subject to probate be “poured-over” into the living trust after administration. Thus, the provisions of a “pour-over” will can allow you to transfer to your living trust property, which by design or inadvertence, you neglected to place into the trust prior to death.

The use of a living trust can be extremely beneficial since it provides a way to avoid the expense and delay associated with probate and guardianships. Additionally, the living trust provides estate tax savings since it insures that each person uses, to the fullest extent possible, their “applicable exemption” (the amount of their estate which is exempt from estate taxes) against any estate tax liability.

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