Transferring assets into a Revocable Living Trust does not guarantee the avoidance of litigation. The very same types of arguments that are used to invalidate a Last Will and Testament, such as lack of mental capacity or undue influence, are used to attack asset transfers into Revocable Living Trusts. If an individual lacked sufficient mental capacity to either form a Revocable Living Trust or transfer assets thereto, or transferred assets into a Revocable Living Trust as a result of being unduly influenced by another party, then these conveyances could be attacked and defeat the Revocable Living Trust.

· Myth 3: Probate administration is expensive and must be avoided at all costs.

The probate administration process is indeed quite expensive in certain states. However, Tennessee is not a particularly expensive state for probate administration. Most estates go through the estate administration process with little or no delays and are often administered between six (6) to eight (8) months. For clients of mine who are concerned about Will contests, I often ask them to tell me exactly who they are concerned with contesting the Will. Many of my clients have a straightforward asset disposition scheme which provides leaving assets for the benefit of the surviving spouse and children. In that case, who would contest the Will? Will contests often involve an individual changing a Will very late in life and sometimes in poor health, done so in secrecy, and often involve eliminating or reducing the share of an individual previously provided for in the earlier Will. In simple terms, many of our clients come to our offices paralyzed with fear about the possibility of a Will contest, but they have never considered whether there is anything about their particular estate plan which suggests that there will be an individual or two who might wish to contest the Will.

Candidates for Revocable Living Trusts

There are three (3) particular categories of recurring clients for which Revocable Living Trusts seem to make sense. Naturally, this is not an exclusive list, but seems to be the most common themes for my Revocable Living Trust clients.

· Candidate 1: Out of State Property Owners.

Tennessee residents owning real estate in another state should strongly consider using a Revocable Living Trust. The concern is having to probate property in more than one state. For example, if a Tennessee resident owns a South Carolina beach home, then at the time of his or her death, it is possible that such resident may have to probate his or her estate in Tennessee, and also probate the beach home through the South Carolina probate administration process. A Revocable Living Trust would allow the client to retitle the South Carolina property into the Revocable Living Trust and avoid the probate administration process in that state.

· Candidate 2: Clients With Privacy Issues.

A Revocable Living Trust does provide more privacy than a Will, which is a matter of public record once a Will is submitted to the Probate Court. Obviously, there are a myriad of privacy issues for individuals, but the notion is that such individual may be leaving all or portions of his or her estate to individuals or entities of which they simply may not want other family members to be aware. If privacy is at a premium for the client, then a Revocable Living Trust may work well.

· Candidate 3: New Tennessee Residents With Existing Living Trusts.

Many of our clients are retirees who have migrated to Tennessee from northern states and Florida, where Revocable Living Trusts are more prevalent. Because these clients have a current estate plan, and many of their assets are already titled into the Revocable Living Trust, it is preferred to amend the Revocable Living Trust for Tennessee purposes. Because Tennessee’s Inheritance Tax exemption does not mirror the Federal Estate Tax exemption amount, any new Tennessee resident should update his or her Revocable Living Trust to bring it in compliance with Tennessee law.

Consistent with the theme that a Revocable Living Trust or a Last Will and Testament should be recommended purely on the facts, circumstances and objectives of a particular client, I outline below what appears to be the advantages and disadvantages of a Revocable Living Trust. These are as follows:

Advantages of Revocable Living Trusts

· Advantage 1: Privacy.

As noted above, a Revocable Living Trust that incorporates an ultimate distribution plan upon the death of the maker (Trustor) of the Trust avoids subjecting the assets of the Trust to the probate administration process, and therefore the Revocable Living Trust document is not submitted as a matter of public record. Following the individual’s death, the assets may be quietly distributed pursuant to the terms and conditions listed in the Trust.

· Advantage 2: Avoidance of Probate Administration.

As noted above, individuals who own real estate in more than one state make great candidates for Revocable Living Trusts, because it can be expensive and time consuming to navigate the probate administration process in two (2) or more states. Also, the Tennessee probate administration process has a four (4) month statutory creditor filing period, and as noted above, an individual should not expect to have an estate probated any sooner than six (6) months at the earliest. A Revocable Living Trust can distribute its assets much swifter than the probate administration process.

· Advantage 3: Ability to Amend The Revocable Living Trust.

A Revocable Living Trust agreement may be amended throughout the lifetime of the individual who established the Trust. Revocable Living Trust documents often need to be amended to bring them into compliance with ever changing tax laws, and certainly need to be amended to the extent that the individual moves from state to state. If the individual became incapacitated for several years, the successor Trustee of the Revocable Living Trust could still amend the document as needed. In contrast, a Last Will and Testament requires an individual to have sufficient testamentary capacity to execute the document, and accordingly, an individual who was incapacitated for several years at the end of his or her life could not update his or her Will to make changes for tax law or other purposes.

Disadvantages of Revocable Living Trusts

There are some disadvantages of Revocable Living Trusts, which often serve to motivate many of our clients to execute Wills instead.

· Disadvantage 1: Expenses.

Revocable Living Trusts simply require more paperwork than a Last Will and Testament. For example, a Revocable Living Trust often requires not only a lengthier Trust document than a Last Will and Testament, but it also requires a Declaration of Trust document (used in conjunction with retitling real estate), a Transfer of Personal Property document, and a “Pour Over” Last Will and Testament. Added to the additional drafting expenses are the additional expenses for retitling property. If the estate planning attorney is engaged to retitle all of the assets into the Revocable Living Trust, then fees will naturally increase for these services. As discussed immediately below, to avoid probate administration, an individual must retitle all current and future assets into the name of the Revocable Living Trust.

· Disadvantage 2: Shifting and Monitoring of Present and Future Assets.

To avoid probate administration through a Revocable Living Trust, an individual must transfer or retitle all current and future assets into the Revocable Living Trust. If the individual dies with a single asset in his or her name that is not subject to a designated beneficiary form, then such asset will be subject to the probate administration process. Shifting and retitling of assets includes, but is not limited to, retitling real estate into the Revocable Living Trust, retitling automobiles, boats, motorcycles, and recreational vehicles into the Living Trust, retitling personal property, household furniture and furnishings and personal effects into the Revocable Trust, and retitling all bank accounts and brokerage accounts into the Revocable Living Trust. In addition, retirement plans and life insurance policies must have designated beneficiary forms drafted for death benefits of these assets that are appropriately designated in a way to ensure that the proceeds will flow through the Revocable Living Trust (or directly to designated primary or contingent beneficiaries). Again, to avoid probate administration, all assets of the individual must be inside the Revocable Living Trust or properly designated to transfer into the Revocable Living Trust upon the owner’s death.

· Disadvantage 3: Not All Property is Transferable.

It is especially discouraging to begin the retitling process and determine that one asset is not allowed to be retitled into the Trust. This often occurs with real estate subject to a mortgage, or where the third party mortgagee will simply not approve and consent to the legal transfer of ownership.

Summary

As can be seen, it is no surprise that the majority of our clients elect to execute a Last Will and Testament rather than a Revocable Living Trust. Many execute Revocable Living Trusts, and they typically fall into the candidate categories listed above. However, those individuals who come through our office with the notion that they can avoid probate administration cheaply and with little or no effort, often are not as excited about Revocable Living Trusts after our estate planning conference. Again, the Revocable Living Trust works well for a minority of clients, who are often high net worth clients owning property in multiple states or who have migrated to Tennessee with an existing Living Trust. Those individuals with a modest estate and a straightforward disposition scheme usually do not merit a Revocable Living Trust due to the expenses and complexity associated therewith. In short, a Revocable Living Trust may make sense for you, but it may not.