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Revocable Living Trusts: Are They The Right Choice for You?

Updated: Jul 12, 2022

Planning for the distribution of assets at death is a great way to take care of your family. While there are many ways to do this so you should explore every option and consider the type of estate planning that’s appropriate for your situation. One device is a Living Trust, sometimes called a “Revocable Living Trust”.

A Revocable Living Trust is a trust that a person, called the Grantor or Settlor, creates, funds, and retains control over during his or her lifetime.  It is an alternative to a Will, meaning that it directs to whom your assets will go when you die.  Why would you choose a Living Trust over a Will?  Some of the often-cited advantages include:

  1. Avoid the cost and potential delays of the probate process;

  2. Reduce taxes;

  3. Privacy; and

  4. Plan for your incapacity during your lifetime.

Revocable Living Trusts may be a good choice for some, but for others, a Will is adequate to achieve estate planning goals.

Probate Process

Many people are encouraged to avoid the probate process.   They fear that if they use a Will, their assets will be tied up indefinitely in court or that their estate will pay high court and administrative fees.  Probate is the procedure used when a person dies and a “probate estate” is opened for the decedent.  A probate fee is imposed and several court filings are necessary.  In some states, probate can be a long and complicated process involving court hearings and expensive fees.  In Pennsylvania, the probate process is relatively straightforward, and the fees involved are generally modest.  The probate filing fees and associated costs are typically less than $750 in Pennsylvania.

Delays in Estate Administration

While a Living Trust can avoid opening a probate estate, it does not avoid many steps involved in administering an estate after a person dies.  For example, regardless of whether a person created a Revocable Living Trust or a Will, notices must be sent to beneficiaries and creditors, real estate and other assets must be liquidated, creditors must be paid, tax returns must be filed and monies must be distributed to the beneficiaries.  A Revocable Living Trust does not eliminate these steps.  Most probate estate administrations are completed within a year and without the need for any court hearings or involvement of any kind.  The amount of time that a probate estate takes to be completed is mostly dependent on how quickly the executor completes these tasks. 

Estate and Inheritance Taxes

A Revocable Living Trust does not avoid or even reduce death or inheritance taxes.  The same rates and amounts of inheritance tax will be payable on assets in a Revocable Living Trust as are payable on assets passing by virtue of a Will.  Trusts are frequently used for tax planning but those trusts are “irrevocable”, meaning that the Grantor gives up a certain amount of control of the assets once placed in the Trust.  Those types of trusts are not the same as Revocable Living Trusts.

Although the Revocable Living Trust will not reduce death taxes, there are some circumstances where it can be very useful. For example, if a person resides in one state but owns a vacation home in a second state, then a Revocable Living Trust can be used to own the vacation home. By titling the vacation home in the Revocable Living Trust, the Grantor can avoid “ancillary probate,” or going through the probate process in two states.


A Revocable Living Trust does provide more privacy than the probate process, so it may be useful in cases involving a private collection that the owner does not want made public; however, a tax return must still include the value and general nature of any such property. 

Money Management

The Revocable Living Trust can also be used as a money management tool in a variety of circumstances and for many different reasons.  If the Grantor becomes incapacitated and unable to manage his or her affairs, the successor Trustee of the Trust could manage the assets according to the provisions in the Trust document.  This can avoid a very costly, time consuming and often traumatic guardianship court proceeding to determine whether you are incapacitated.   It can also be used to manage money for someone, perhaps a child or loved one, who is irresponsible with money (a “spendthrift”).      

Costs of Forming Trust

For those considering a Revocable Living Trusts, there are caveats to keep in mind.  It is important to note that the Revocable Living Trust is typically a more complex document than a Will, and as such, the cost to prepare the Revocable Living Trust is generally substantially higher than the cost of a Will – perhaps triple or even more than the cost of a Will.  You will also incur the cost and time necessary to retitle all your assets to the Trust.  You must prepare and file new deeds to real estate, retitle your vehicles, retitle all your bank and investment accounts, revise the beneficiary forms for life insurance, retirement and other accounts.

Complexity of Managing Trusts

The complexity of a Trust can makes managing them during your lifetime more difficult.  People with Trusts often have only a vague idea of the requisites for titling and holding assets in their Trusts.  The companies with whom you do  business, including banks, car dealerships, financial advisors, etc. are frequently unfamiliar with the rules relating to Revocable Living Trusts and make mistakes in titling assets.  If you have a Trust, you should expect to periodically incur costs for legal advice about titling and managing assets in your Trust. 

Additionally, it is essential to understand that a Revocable Living Trust only controls assets, and thus avoids probate, if the Grantor titled all his assets in the name of the Trust. Any individually owned assets that remain titled in the Grantor’s name (that do not have a beneficiary designation) must still pass through probate. This means that after the Trust is drafted and signed, the Grantor must be vigilant to always re-title all his bank accounts, stock accounts, and individually titled assets into the Trust. If he does not transfer his accounts and assets into the Trust during his lifetime, then when the Grantor dies, those assets must still pass through the probate process to be distributed to the beneficiaries according to the terms of the Revocable Living Trust. Therefore, a person utilizing a Revocable Living Trust should still have a “Pour-Over” Will to ensure that any assets left outside the Trust will still pour into the Trust at the Grantor’s passing. This means that the estate plan must include more documents and is necessarily more complex.

Not a Substitute for Power of Attorney

A Revocable Living Trust is not an adequate substitute for a Durable General Power of Attorney.  In the event you become incapacitated, your Successor Trustee has the authority to manage the Trust assets but no other property or assets that you own outside of the Trust.  In other words, your Living Trust does not give your trustee any authority over assets that have not been transferred to your living trust.

On the other hand, your agent under a Durable General Power of Attorney has authority to manage any assets you failed to include in your living trust, as well as your retirement accounts, annuities, and social security benefits. Additionally, a Power of Attorney provides your agent with more wide-ranging power over such matters as the ability to gain access to your mail, your internet accounts, social media accounts, deal with the IRS, and execute contracts on your behalf, as well as many other transactions where legal authority is required.

So, the question remains: do you need a Revocable Living Trust, or is a Will sufficient to meet your needs?  Understand what a Revocable Living Trust does, and what it does not do.  Overall, in certain unique circumstances, a Revocable Living Trust can be an important part of an estate plan.  All relevant factors should be considered before deciding whether this type of Trust is appropriate, as the same goals can frequently be fulfilled by utilizing a more straightforward and cost-effective Will.

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