Advantages for a Living Trust During Grantor’s Lifetime

There are numerous advantages for a living trust for a grantor’s lifetime. The advantages and descriptions will help you better understand how a living trust can be of benefit to you.

Property Management—

Most middle-aged grantors that establish a living trust name themselves as the trustee.  Frequently, the grantor may name his or her spouse as a Co-trustee so that the couple can operate their finances in a similar way as they did before the living trust was created.  As trustee, the Grantor operates with as much control as he or she had prior to the creation of the trust.  Thus, assets may be sold, purchased and investments may be made by the client free of restrictions, especially in light of the ability of the Grantors to change the terms of the trust or to revoke it entirely.  Alternatively, a client, especially an elderly client, may decide that an institutional trustee should be selected, either as sole trustee or co-trustee to manage the funded revocable trust.  If this option is chosen, the main motivation of the client is to shift the responsibility of the management of his or her finances to someone else especially if the client feels burdened by the financial management chore.

A Substitute for a Conservatorship Upon Incompetency—

One of the most important advantages of a revocable trust during the lifetime of the grantors is its great flexibility when dealing with the incapacity of the grantor(s).  In the event that the Grantor should become incompetent, management of assets by the grantor’s Co-Trustee or designated successor trustee is much preferable to a conservatorship.  Family members are reluctant to have a loved one (e.g., a spouse or a parent) formally adjudicated to be incompetent to handle his or her financial affairs.  Not only are such proceedings expensive, they are emotionally draining on all of the family members, especially if undesired publicity results from the proceedings.  While it is true that a durable power of attorney may be a viable alternative to a conservatorship, third parties, such as banks, are often more skeptical about their validity, especially if the instrument is several years old.  How well I remember a former student of mine informing me that a bank officer refused to honor the durable power given to him by his elderly father who could no longer handle his financial affairs.

There are two additional advantages of Revocable Living Trusts to consider.

Qualified estate planning attorneys are aware of two additional advantages of a revocable living trust, namely: asset review and avoidance of errant dispositions.

Asset Review—

A fully funded revocable living trust has “the ancillary benefit of educating the settlor as to both the nature and value of assets.  It also frequently will uncover any existing title problems during the settlor’s lifetime at a time when they are easier to resolve.”  See Hood, Mylan & O’Sullian, Closely Held Businesses in Estate Planning (2d Ed) at 8-8.

Avoiding Errant Dispositions—

“The titling procedure in transferring property to the revocable trust or naming the revocable trust as beneficiaries helps to ensure that the estate plan is not compromised by joint tenancy ownership or errant beneficiary designations. ” Id.  Unfortunately, such a review is often not undertaken when a will is the primary testamentary instrument usually because the client is unwilling to pay for the additional fees that are likely to be incurred as a result of a review.

The use of a revocable trust has significant lifetime advantages for the Grantor and most of the time the attorney fees incurred in establishing it are more than justified considering the fees that would be incurred in establishing a conservatorship as well as the potential loss of asset value that may occur from the ineffective financial management by the client of his or her assets.

If you have questions or would like to explore the best options for your estate planning needs, contact our office at 816-561-5000. 

*This post was originally published on September 18, 2011