A Revocable Living Trust is often used in estate planning to avoid probate. It is a useful tool in the right circumstances.
Most people use a Revocable Living Trust to hold assets, such as a house or rental properties. The person who sets up the Trust, and usually funds it, is called the “Settlor.” The Trust is “revocable” because the settlor can revoke it at any time. It is called “Living” because it is created in the Settlor’s lifetime.
When the Settlor dies, then the Trust becomes irrevocable. The property that has been transferred into the trust stays in the trust and does not pass through the Settlor’s Estate.
A huge selling point of a Revocable Living Trust is that the Settlor’s will does not have to be probated because all of the assets are in the Trust at the time of death. This saves the cost of probate.
Sometimes that is true. IF all of the assets were transferred to the Trust, and IF there were no unpaid debts at the time the Settlor died, then this might be a good tool. It may also be useful for other purposes.
In Texas, the cost and expense of setting up and maintaining a Revocable Living Trust is usually greater than the cost of probating a will. We are very lucky to live in a state that provides for Independent Administration of an Estate – where the applicant proffers a will for probate and the court issues letters testamentary to an executor. At that point, the only other interaction the executor has with the court is to file an Inventory and Appraisement. With a simple, uncontested estate, the cost of probating a will averages between $1500 – $2000, and takes less than 60 days.
There are a number of different kinds of trusts, each with its own purpose. A Revocable Living Trust is certainly an option for estate planning, as long as its purpose is clear, defined and necessary.