- Aside from creating an RLT to manage and distribute asset, it can also avoid the cost and inconvenience of probating a will. In some states, probate costs are quite substantial, and if you have real estate in a number of states, your will would have to be probated in each to transfer title to your beneficiaries. However, if the title is held by the RLT, no such probate is required. In addition, your privacy will be maintained because the assets in an RLT are not ordinarily made public. Finally, if you are the trustee of the RLT and you become incapacitated, you can name someone else as trustee to manage the affairs of the RLT, thereby avoid public guardianship proceedings.
- The cost of both planning and running an RLT can be quite expensive. For instance, establishing an RLT is more complicated than establishing a will. Moreover, if you have named someone other than yourself as trustee, like the trust department of a bank, you will have both administrative fees as well as those for advice which can be substantial. Furthermore, it takes considerable work to make sure that the books of the RLT are in order and that all the assets you want placed in the trust are made. Finally, minor mistakes in the trust agreement can cause major problems and expense.
- Just because you have set up a RLT does not mean that you will save income, gift or estate taxes in the assets of the trust. In fact, when you pass away, the federal government requires that an estate tax return be filed, including all the assets of the RLT, if your total estate exceeds a certain size. For example, in 2005, all estates in excess of $1,500,000 had to file a return.
- There are three basic steps that you will need to follow to do this. First, you must determine what provisions your RLT will contain, both during your life and after your death. Second, engage an attorney who specializes in estate law who will be responsible for writing the trust agreement. Finally, once the RLT is in effect, you will need to transfer all of the assets that you want the trust to own. That will include deeds of real estate, title to investments such as stocks, bond, bank accounts, etc. Also, if your RLT is to become the beneficiary of any life insurance upon your death, forms will be provided by the companies for you to do so.
- The cost of an RLT will be based on the complexities of your estate and on the time required by your attorney to write the agreement. The simplest of agreements will cost about $1,000, but that can be significantly more if your estate is more complicated. Since your RLT probably will not own all of your property, it is always smart to have your attorney draw up a will at the same time. It is always a good idea to get an estimate of the costs from your attorney before the work is begun.
