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Pros and Cons of Establishing a Revocable Living Trust Thumbnail

Pros and Cons of Establishing a Revocable Living Trust

Pros and Cons of Establishing a Revocable Living Trust

Trust funds are well-regarded estate planning tools, especially among high-net-worth individuals. Trusts come in many types, and one of the most popular is a living trust, which is a legal arrangement that allows the grantor to transfer assets into a trust while maintaining control over the trust and the assets within it; the grantor can modify the terms of the trust or cancel the trust at any point in their life if circumstances change. Once the grantor passes away, the trust becomes nonrevocable, and assets held within the trust are transferred to the named beneficiaries or held in the trust until specific stipulations the grantor set forth are met. Several factors come into play when deciding whether a revocable living trust is the best estate planning tool for your unique situation and whether one should be a part of your overall estate plan.

Reasons to Consider Using a Revocable Living Trust

Your Family Values Privacy and Efficiency

The probate court process is often expensive, time-consuming, and emotionally exhausting, especially for grieving families. Assets in a trust usually bypass probate court, unlike assets solely in the deceased person’s name and those beneficiaries listed in a will. Often, skipping probate means beneficiaries receive the assets more efficiently, and the details can be handled discreetly instead of in a public court proceeding. This is especially important if you value privacy and do not want information about your family’s finances and estate to become public knowledge, such as who you named as beneficiaries or exactly how much each beneficiary received. 

You Want More Control Over How and When Assets Are Distributed

Creating a trust allows a person to set the terms for when, how, and to whom their assets will be distributed and to appoint a trustee to oversee this distribution. For example, you can dictate the timeline of when assets will be distributed, staggering the release over a period of years or requiring that the beneficiaries meet certain lifestyle requirements before receiving the assets. If you have concerns about a beneficiary’s ability to manage their inheritance wisely but still want to provide for them financially, adding a stipulation for how and when the assets will be distributed can give you more peace of mind.

You Value Flexibility

Because a living revocable trust allows you to update the trust’s beneficiaries, assets, and terms at any point, you can set one up earlier in life without worrying about having regrets if your circumstances change later in your life. You can add or remove beneficiaries as the relationships in your life change, add or remove assets as your financial plan evolves, and modify the terms of distribution if desired. This is ideal for individuals with changing family dynamics or who expect to significantly increase their net worth in the near future.

Drawbacks to Using a Living

Trusts Require Additional Time and Effort

Establishing a trust is more complex than writing a will because it requires you to legally transfer ownership of each asset to the trust, requiring more time and effort. You should also consider consulting a legal professional to guide you through the process and ensure your paperwork is legally sound. The costs of setting up a revocable living trust can vary depending on where you live and the lawyer with whom you choose to work, but it typically costs more upfront to establish a trust than it does to write a will. 

Additionally, the flexibility of this type of trust means it will require ongoing maintenance if you choose to make changes throughout your life. Assets you acquire after establishing the trust will only be distributed as part of the trust upon your passing if you remember to transfer them to the trust and add a beneficiary. If you do not make these updates, the assets outside the trust will have to go through probate.

Revocable Living Trusts Do Not Provide Effective Asset Protection

Revocable living trusts do not protect your assets from creditors to the same degree as other estate planning tools. Because the grantor maintains control over the trust during their lifetime, creditors can come after assets in the trust to settle outstanding debts. Additionally, revocable living trusts do not protect your assets from lawsuits. If your profession or lifestyle leaves you especially vulnerable to being sued, you may want to consider using another estate planning tool that prioritizes asset protection over flexibility.


Estate planning can be complex, and each family will have unique considerations and priorities that shape their strategy for how and to whom assets will be distributed after a death in the family. The financial advisors at Business & Financial Strategies are experienced in helping their clients navigate the intricacies of estate planning so they can make informed decisions regarding what estate planning tools and strategies they will use. Business & Financial Strategies’ financial advisors can provide personalized guidance to help you create an effective estate plan to reduce the financial and emotional toll on your loved ones after your death. When estate planning, it is essential to work with someone familiar with your state’s estate or inheritance laws. Business & Financial Strategies has offices in the Iowa City/Coralville area and in Fairfield, Iowa, and it serves clients throughout the United States. To learn more, call 319-358-7700 or visit www.BFSFinancialPlanning.com to schedule a complimentary 20- to 30-minute in-person or virtual initial conversation.

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