What Are Some Of The Disadvantages Of A Revocable Living Trust?

While the advantages of a revocable living trust receive most of the public attention, the disadvantages should also be considered. Since a revocable living trust is a more complex legal document, it is often more costly to establish. Also, deeds and other transfer documents must be prepared transferring the grantor`s assets to the trust, a process which can require a substantial investment of the grantor`s time. The use of a revocable living trust requires more ongoing monitoring to ensure that assets remain in the trust and that newly purchased assets are titled in the trust. For instance, a grantor who transfers funds to a second financial institution (perhaps to obtain a better interest rate) must remember to advise the new institution to title the new account in the trust. After the grantor`s death, some of the income tax rules applicable to a trust are not as liberal as those available to a probate estate. For example, a probate estate may elect to use a fiscal year as its tax year, while a trust is restricted to the calendar year. Trusts must pay estimated income tax payments while a probate estate is exempt from this requirement for the first two years. Trusts are also subject to other tax rules that do not apply to probate estates.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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