In our sophisticated community, virtually everyone understands the need for a revocable living trust as the core element of an estate plan.
We have learned over the years that you may not understand the benefits of a trust and how it functions, particularly upon your incapacity. The most grievous mistake you might make: assuming “a trust is a trust” and that all trusts are simply fungible, all the same.
You may look for the cheapest price for a trust, go to the attorney who happens to be nearby or use a paralegal or other alternative resource. These can be costly mistakes.
In a previous column, I stressed the fact that you are not “vanilla.” Your family, every family, has its unique challenges. Using a “vanilla trust” with standardized, unimaginative language can do you and your family a serious disservice. With this in mind, I review four primary benefits of appropriate revocable trust planning.
Benefits of planning
• Avoiding probate. This is the best-known benefit of a trust. A wealthy person dies with a trust, and everything about his or her estate is invisible to the public. A wealthy person dies without a trust, such as the actor James Gandolfini or the singer Prince, and his or her financial affairs and family circumstances are exposed to the world. This is because the unplanned estate went through the court probate process.
To avoid probate, your nonretirement assets must be titled in the name of your trust. This includes real property that is in another state. Key: Titling of your assets must be monitored annually to be sure that new accounts and new properties are titled in your trust. Otherwise, even if you have a trust, the costly and time-consuming probate process might be unavoidable.
• Efficient management upon your incapacity. You are no doubt the trustee of your trust. You are in control. Your trust identifies an alternate or successor trustee who takes over if you are not able to serve as trustee because of incapacity or upon your death. Without going to court and with great efficiency, your successor trustee can take over and have the ability to manage all of your affairs, pay your bills and otherwise take care of trust assets. Be sure you name someone you trust in this role. Rarely is it a good idea to name more than one person as co-trustees.
And remember: Name a person in or outside your family who is responsible. Don’t name your oldest child just because he or she is your oldest child.
• Tax planning. For a married couple, alternative approaches can be taken to maximize estate-tax protection. This level of protection is currently $11.7 million per person. In 2026, it drops precipitously to well under $6 million per person. Proposals in Congress would reduce it even more dramatically, perhaps to $3.5 million per person.
Proper drafting can save millions of dollars for your family. Inexpert drafting can cost your family millions of dollars in estate and other taxes.
• Family values. Your trust is a planning tool that enables you to pass along family values, your personal legacy. Did you discuss this with your attorney or other adviser? Are you simply leaving everything to the kids without giving it a second thought? Have you built in charitable gifts, considered a family foundation or taken steps to ensure that your planning factors in your social and charitable objectives? Do you have religious or other values that are important to you and that you want to perpetuate and convey to your children, grandchildren and beyond?
Your revocable trust is what you make of it.
Michael Gilfix, Esq., is a partner at Gilfix & LaPoll Associates in Palo Alto. For more information, call 493-8070 or email MG@Gilfix.com.