DO YOU NEED A WILL, A REVOCABLE LIVING TRUST OR BOTH?

June 26, 2024

When estate planning is considered, most people immediately think they simply need a Will. Estate planning is much more than just a Will, and sometimes also includes a Revocable Living Trust (“RLT”) under the right circumstances. This article is not intended to address the other ancillary documents frequently put in place when you are contemplating your estate planning, such as the Durable Power of Attorney, which you can read more about here, and health care documents, which we address here.

Oftentimes, a comprehensive Will is used to dispose of probate assets on the death of an individual. In some instances, a simpler pour-over Will coupled with an RLT is utilized. An RLT is an administrative tool that is created and used during your lifetime that also serves to dispose of your assets upon your death. It allows you to control your assets while you are competent and alive pursuant to the trust provisions, which are amendable and revocable during your lifetime, and allows for the possibility of a smoother and quicker disposition of your assets upon your death than probating a Will that will dispose of your asset.

When an RLT is utilized, instead of preparing a comprehensive Will, a pour-over Will is utilized. A pour-over Will is different than a comprehensive Will in that it is a simple document and typically solely directs any probate assets that are not already owned by the RLT to be distributed to the RLT upon your death (in case you missed putting or directing something into the trust during your life). A pour-over Will may not necessarily need to be probated with the Surrogate’s Court since avoiding probate is one of the main reasons that people choose to create RLTs, but it is a safeguard in case there are any probate assets that were omitted from being transferred into the RLT during your lifetime. If you only have an RLT and no Will whatsoever but leave probate assets not owned by the RLT, upon your death an application would have to be filed with the Surrogate’s Court in the county you were domiciled in upon your death to have an Administrator appointed. Once appointed, the probate assets would be distributed pursuant to the intestacy statutes in the State that you were domiciled in, which could be inconsistent with your actual wishes. Proper coordination is key.

Some of the benefits of utilizing an RLT in an estate plan include:

• The ability to transfer and consolidate assets into the RLT during your lifetime, which takes effect immediately upon its execution and are, generally, immediately available to your beneficiaries upon your death.
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• You can also make the RLT the beneficiary of certain assets that you wish to consolidate into the RLT upon your death for distribution pursuant to its terms.
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• The RLT can be amended or revoked at any time during your life so long as you are competent, so it is very flexible. It is also intended to benefit the creator during life.
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• Utilizing an RLT may avoid the process of probating a Will with the Surrogate’s Court, assuming you have done the work up front to coordinate the ownership and beneficiary designations on your assets as may be appropriate to coordinate with your estate planning. In some instances, probate may take a significant amount of time to conclude in some States and could be expensive. In New Jersey, the probate fee is minimal as it is based on the number of pages of the Will and the process time is fairly quick depending on the county. However, in New York, for instance, the probate fee can be substantial as it is based on the value of the estate and the process time can take months if not longer depending on the county of domicile at the time of death.
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• The RLT provides privacy in that it is not required to be filed with the Surrogate’s Court. The only individuals that would see the RLT are the Trustee and the beneficiaries. When you probate a Will with the Surrogate’s Court, it becomes a public document and anyone can go to the Surrogate’s Court to see the provisions of your Will and any ancillary documents that are required to be filed with the Surrogate’s Court, such as those that list out the assets of your estate. Of course, if your estate is involved in litigation that involves your RLT, it will likely be attached to pleadings filed with the Court, reducing this benefit.

• If you own real estate outside of the State you are domiciled in and transfer the out-of-state property into the RLT, you can avoid the necessity of filing an application with the Surrogate’s Court in the State where the property is located for an ancillary probate.
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• The assets owned by the RLT get a stepped-up basis. This means that the government values the assets owned by the RLT on the market value as of your date of death rather than when purchased by you. Of course, the flip side is that they are also included in your taxable estate because you control them during your lifetime.

If you choose to create an RLT as part of your estate plan, it is important that you also review your asset ownership and beneficiary designations so that they align with your estate planning objectives. For instance, if you own real estate jointly with your spouse and you did not transfer the ownership to the RLT, but in your RLT you direct that the real estate be distributed to a child of yours upon your death, the property will belong to your spouse and not your child.

Our Trusts & Estates attorneys at Pashman Stein Walder Hayden P.C. are available to assist you with your estate planning needs, including evaluating what approach might make the most sense for you given your individual circumstances. Estate planning is not one size fits all, and we encourage you to avoid a cookie-cutter approach to estate planning.

Learn more about our Trust & Estates and Elder Law & Special Needs Planning practices.

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The information contained herein is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials do not create an attorney-client relationship between Pashman Stein Walder Hayden P.C. and/or its attorneys, and the reader of the materials.