You may have heard that “You MUST have a revocable living trust!” Typically this proclamation is found in seminars, articles or flyers you receive in the mail. They often promote revocable living trusts as “must-have” legal documents. While there are many very useful benefits to be gained from these trusts, they are not necessarily the right choice for everyone in Tennessee.
Probate: Court supervision process of finalizing a deceased person’s final expenses, debts, and taxes, and transferring assets as directed through the will or state law.
The chief reason why most clients will use a revocable living trust is to avoid probate. Thus, in states with complicated and expensive probate procedures, revocable trusts are often desirable. Tennessee happens not to be one of these states. For example, court fees to open probate in Knox and surrounding counties are generally less than $500, and the process is usually not complicated.
Other rumored benefits of a revocable living trust include: saving on estate and inheritance taxes and protection against creditors. In truth, a properly drafted last will and testament operates as effectively for possible tax savings as a revocable living trust in Tennessee. A revocable living trust does not provide protection against creditors. Tennessee does allow for domestic asset protection trusts that provide certain creditor protections, but such trusts must be drafted specifically to meet the requirements of the statute and the basic revocable living trust does not qualify.
Revocable Living Trusts can be advantageous for theperson:
- Real estate in multiple states — Probate is necessary in every state where you own real estate (such as vacant land, a house, or certain timeshares). Multiple probates create multiple court proceedings, and possibly the need for a different lawyer in each state. Avoiding multiple probates is a compelling reason to establish a revocable living trust.
- Disability planning — Professional trust advisors can handle your financial affairs if you become incompetent through a revocable living trust. Once assets are transferred into the trust, a bank or trust company could take over as Trustee upon your incompetency. The corporate trustee would pay your bills, keep detailed records, and manage the trust assets during the period of your disability. Instructions are often much more detailed for the Trustee to follow in a revocable trust as compared to the standard financial power of attorney.
- Protect your plans — Revocable living trusts may make contesting your estate plan more difficult and keep your testamentary wishes private.
If you are considering establishing a revocable living trust, you should speak with a Tennessee-licensed attorney who practices in the area of estate planning to determine if a revocable living trust is the best fit for you.