Living TrustMany of my clients have heard national financial gurus like Suze Orman emphasize that a Revocable Livings Trust (or RLT, for short) is an essential part of ANY complete Estate Plan.  Well, that is not quite true.  When clients ask me whether they NEED an RLT, my lawyerly response is, of course, “it depends.”

Trusts, including RLTs, can be very flexible and effective tools for protecting assets and addressing various client concerns.  RLTs, specifically, are touted as excellent tools for avoiding probate fees.  Most clients give this as the #1 reason why they are interested in an RLT at all.

RLTs can do MUCH more than that, of course, but if my clients are interested ONLY in avoiding probate fees, I would be remiss in my duty to them if I did not present OTHER (less expensive) ways to reduce (or eliminate) probate fees. 

The probate fee in NC is currently 0.4% of the value of all probate assets and is capped at a maximum fee of $6,000.  So, in NC, if your probate estate is worth $500,000 dollars, the clerk will charge a probate fee of $2,000.  If you are paying an attorney more to draft an RLT that it would save you in probate fees, then only the attorney is benefiting!

Since the bulk of my clients’ estates are in retirement plans, brokerage accounts, and life insurance policies, my favorite tip for reducing their exposure to probate fees is to encourage them to designate beneficiaries on their  retirement plans accounts (§401(k)s, §403(b)s, traditional IRAs, Roth IRAs, annuities, etc.) and life insurance policies.  If their named beneficiaries survive them, then the funds in those accounts pass directly to those beneficiaries and do NOT incur probate fees.  I don’t know of a single company that charges its clients to make or change beneficiary designations; making such changes usually involves filling out and mailing in a form.

Every client is different; every family is different.  An RLT may be a great solution for some, but not for others.  Please talk with an experienced and knowledgeable Estate Planning attorney in your area to determine if having an RLT makes sense for you.