I’ve often written about why Revocable Living Trusts are often unnecessary in New Jersey and other states with simplified probate. While many times for New Jersey residents an RLT is unnecessary, there are some situations where an RLT makes sense. In this post, I will list out my favorites:
1. You live in a state where probate isn’t simplified. If you live in a State which does not have simplified probate, then RLTs are the way to go. This advantage doesn’t apply to residents of states like New Jersey with simplified probate.
2. You want to avoid ancillary probate. If you own real estate outside of your home state, your will must generally be probated in both your home state and the states where you own real estate. RLTs can be used to avoid this. If you place your out-of-state real estate into an RLT, you will only need to go through probate in your home state.
3. Privacy. Although probate is a very simple process in New Jersey and many other states, it isn’t entirely private. Before your death your will is a private document. However, after your death anyone may theoretically request a copy of your will from the county. If sensitive matters are being addressed in your will that you don’t want as part of the public record, the only way to keep them entirely private is through use of an RLT to avoid probate altogether.
4. Incapacity. Generally, most of my clients plan for possible future incapacity by executing a Power of Attorney authorizing someone else to handle their affairs. There are however instances where banks have refused to honor Powers of Attorney which were executed many years before they were used (despite the Power of Attorney still being legally valid). This isn’t the end of the world, but it does mean the person you specified as your preferred guardian in your estate plan would need a formal court appointment as said guardian or conservator. On the other hand, with an RLT, the bank accounts aren’t held by the individual, but rather by the RLT. The RLT can specify that a new trustee steps in upon your incapacity. The new trustee will then have full power over the accounts since they are owned by the trust, not you individually.
5. Speed. With a will, after you die, your Executor may have to wait several months before being able to sell your real estate or other assets. This is because he or she may have to wait for “tax waivers” from the Division of Taxation. On the other hand, with an RLT, your executor can start selling or otherwise “moving around” assets immediately.
If any of these circumstances seem to fit you, then an RLT is probably your best option.
If you’re considering an RLT, it makes sense to engage a qualified attorney. If you’d like to become a client of mine, contact me.