What is the Difference Between a Will-Based Plan and a Revocable Living Trust-Based Plan?

Most people have heard something about revocable living trusts (sometimes referred to as “RLTs”) and wonder if it is the right choice for their estate.

First, it is important to define what a Revocable Living Trust is. It is a trust established during the grantors’/settlors’ (the people who establish the trust) lifetime, and it may be unwound.

Now, to answer the question (and risk sounding too much like an attorney): it depends. Below are some of the factors a person should consider when deciding whether to use a Revocable Living Trust in his, her, or their estate plan.

• Where do you live primarily and what is that state’s probate process? When a person dies with a valid will, that person’s estate usually needs to be “probated” (or use the court process to settle the deceased person’s estate). In some states, this can be expensive, complex, and/or time-consuming, so people use Revocable Living Trusts to avoid the probate process. However, in Washington State, probate is not as expensive or onerous as in other states, and will-based plans are common.

• Are you the type of person to keep up with how assets should be titled? Revocable Living Trust-based plans require certain assets to be titled in the name of the trust. If assets are not titled correctly, those assets (depending on the type of asset) may still need to go through the probate process before going through the trust administration process. So, if you use a Revocable Living Trust, make sure you know whether an asset should be titled in your name or the name of the trust and title them accordingly.

• Do you own real property outside of the state you primarily live? Generally, if real property is going to go through the probate process, it goes through the probate process of the state where it is located. However, holding out-of-state real property in a Revocable Living Trust makes it easier to avoid the probate process in the other state.

• Do you need your estate administration to be kept private? When a will is probated (after a person has died), it becomes a public record, so anyone can see the information in your will. The same is not true for a Revocable Living Trust. Although it is important to note, in certain circumstances, a trust document may still need to be filed with a court.

These factors are by no means the exclusive factors to determine what type of plan is best for you, but they are the factors I run into the most often. It is always best to weigh your options by talking to an attorney, and we are more than happy to talk through your specific circumstances with you.