In my previous life as a practicing Estate Planning attorney, I would often joke with clients who brought me revocable trusts to review. My go-to quip was to ask the age and retirement date of their former planner.
Whether that got a laugh is debatable, but one thing this is certain. Revocable trusts have become increasingly popular in the last decade, largely due to one statutory phrase…“less restrictive alternatives to guardianship.”
Once used primarily for avoiding probate in the Texas Probate Systems, revocable trusts are now used to bypass the need for guardianship of the estate, which can be a sticky and time-consuming issue.
Guardianship is an up-and-coming new facet to estate planning that, unfortunately, has been cast aside in the past. Previously, it was thought that guardianship was only needed in extreme instances of minor children (who have no assets) or the severely disabled with intellectual disability (often no assets to enable Medicaid waivers).
However, with multigenerational living arrangements trending down and the need for memory care assistance trending up, guardianship has come to the forefront of estate planning.
At Argent, we address guardianship in every new client planning meeting. Among the many questions asked, often the most thought-provoking is “What if you don’t die?” This typically sets off a whirlwind of emotions, a bit of rambling, until finally, a stammering “I don’t know.”
Assigning a person or entity to manage an estate during the grantor’s incapacity or death is one of the most important decisions in the estate planning process. The grantor has the option of naming an individual trustee or a corporate trustee. Though there are pros and cons to both, naming a corporate trustee can often be an ideal solution.
Prime example: An elderly male with a net worth of $8,000,000 has no immediate family, and no family close by. With a revocable trust, he names Argent as a successor trustee. When he becomes incapacitated, Argent takes over his financial care. He does not have to worry about elder abuse, scams, a ne’er-do-well friend, or his own mismanagement of funds.
Further, he’s able to live a relatively normal life (albeit with assisted care) with little outside intervention, and it’s all done outside the purview of the Texas Probate System. In fact, the courts view this as a win because it’s a less restrictive alternative to guardianship.
A second example lies in a “Yours, Mine, and Ours” scenario. A couple has a second marriage and a blended family. Children exist from prior marriages, as well as second marriages. The revocable trust allows for proper movement, management, or creation of further trusts that do not alienate any of the heirs and, more specifically, the remaining spouse. All this occurs during the lifetime of the remaining spouse, not after both deaths.
In this instance, the revocable trust with a corporate trustee allows for the financial management of the estate to be outsourced while protecting the remaining spouse and the heirs. This is especially important in protecting and preventing financial exploitation of the elderly.
Regardless of whether a person chooses an individual or a corporate trustee, revocable trusts are versatile tools that can be highly effective in taking guardianship concerns out of the equation.
Examples include:
- Changes in capacity
- Shifts in family structure
- Passing of the family CFO
- Protection of blended families
Designating a corporate trustee as the trustee of a revocable trust can significantly enhance the manageability of these situations.
For more insight into the benefits of a revocable trust, or any other asset or wealth management questions, talk to Argent.