Compared to a simple Will, a Revocable Living Trust (RLT) is a more powerful and flexible estate planning tool. Particularly in Rhode Island, where each of the thirty-one cities and towns has its own probate court and probate judges, it is important to understand the many benefits of creating an RLT. This article aims to highlight seven benefits of a Revocable Living Trust that residents of the Ocean State can use to help accomplish their estate planning goals.
Understanding the Basic Elements of a Revocable Living Trust:
Before discussing the specific advantages, we should answer the question: what is a Living Trust? I think it is easier to describe a Trust in tangible terms. Picture, if you will, a Trust as a shiny red wagon. What can a wagon accomplish? Well, you can place heavy objects in it, pull them more easily in various directions, and later bring them to a destination. In legal terms, the Trust (shiny red wagon) holds ownership of your assets during your life and simplifies the distribution of those assets when you die. Unlike a Last Will and Testament, which requires a complicated, time consuming, and expensive probate process, an RLT can sidestep the probate process and quickly transfer your property to your beneficiaries.
Advantage 1: Privacy
A major advantage of having a revocable living trust in Rhode Island is that it keeps your estate plan private. We’ve all seen movies where the family members rush to the lawyer’s office to hear the “reading of the Will”. That becomes the moment when everyone discovers how much, or how little they will be getting, or whether they will be disinherited entirely. A probated Will becomes a matter of public record. That is not, however, how Trusts function. There is no “reading of the trust” in a room full of distant relatives. Trusts are private and people wishing to keep their financial assets and beneficiaries private recognize the benefits and confidentiality of creating a living trust.
Advantage 2: Avoid the Probate Process
In Rhode Island, probating an estate can take 6 months to more than a year and can incur substantial legal fees. The goal of avoiding probate, therefore, becomes a primary reason for creating an RLT. While co-ownership of assets and beneficiary designations can minimize the need for probate, the Revocable Living Trust is often the most effective tool. The key to avoiding probate is to not die with assets titled in your name alone, or assets having no beneficiary designation. By placing certain assets into a RLT during their lifetime or making the RLT the transfer-on-death beneficiary, a person can ensure that no assets need to be probated upon their death. Do not underestimate the power of reviewing and updating beneficiary designations on all financial assets like bank accounts, life insurance, brokerage accounts, and retirement assets. Also, because Rhode Island does not have a Transfer-on-Death Deed option, it would be wise to seek counsel regarding placing your home into an RLT to keep it out of probate.
Advantage 3: Control and Flexibility
As the name implies, a Revocable Living Trust is flexible. The RLT can be amended, modified, or revoked during the grantor’s life. When life’s circumstances change, or tax laws become a concern, an RLT can be modified accordingly. An RLT offers individuals the ability to make changes as needed so their plan can evolve and be updated over time.
Advantage 4: Avoid or Minimize Death Taxes
Estate Taxes, sometimes referred to as “death taxes” is a governmental tax imposed on estates exceeding a certain dollar value. In 2024, the Federal estate tax is imposed on estates exceeding $ 13.61 million. A marital deduction, however, is an exception to the estate tax and permits a married person to transfer an almost unlimited amount of property at death to a spouse. This deduction merely delays the calculation of the estate tax until the death of the surviving spouse. Also, Rhode Island is one of twelve states that also imposes an estate tax at the state level. The 2024 RI state exemption is on estates valued at $ 1,774,583 or less. A carefully designed RLT can lessen both types of estate taxes to increase the amount that passes to beneficiaries.
Advantage 5: Management of Assets during Incapacity
An effective estate plan should prepare for possible incapacity of the grantor. An RLT can effectively manage property if the grantor becomes incapacitated through appointment of a successor trustee. When an RLT is drafted, the grantor simply lists one or more trusted individuals or Trust Companies to act as a backup should he/ she later become unable to manage their financial affairs. By planning for the incapacity in advance, the grantor’s family can be assured that the assets will still be managed without having to get the courts involved.
Advantage 6: Management of Assets in Multiple States
It’s not uncommon for a person to own assets in more than one state, especially when they live in a state as small as Rhode Island. By using a Revocable Living Trust, ownership of assets in multiple states can be consolidated under one entity. This can simplify management of the assets and avoid having to probate the assets in multiple states.
Advantage 7: Minimizing Challenges to Estate
An effective estate plan should not be vulnerable to being challenged or contested. Because a will must travel through the Probate Process, and is subject to public scrutiny, it is more easily contested. A Revocable Living Trust, however, has built-in protection by authorizing how assets are to be managed, distributed, and by whom. An RLT also lists successor trustees and successor beneficiaries to avoid having the court resolve disputes.
There are a great number of benefits for a Rhode Island resident to choose a Revocable Living Trust over an ordinary will. Whether the individual has young children unable to manage assets, owns real estate here or in multiple states, wishes to keep their estate plan private, recognizes the advantages of avoiding probate and minimizing estate taxes, or wants a plan that can be adjusted with the changes of life, a carefully drafted Revocable Living Trust is the more comprehensive approach for the management, protection and distribution of assets.
