Estate and Trust Forum the Revocable Living Trust Revisited
| Publication year | 1989 |
| Pages | 225 |
1989, February, Pg. 225. ESTATE AND TRUST FORUM The Revocable Living Trust Revisited
In a previous issue of The Colorado Lawyer, this author published an article entitled "Should the Funded Revocable Trust Be Used to Avoid Probate?"(fn1) An update of that article has been requested by the Probate and Trust Law Section of the CBA for several reasons. First, it appears that some lawyers are attempting to market estate planning work where the revocable trust is the primary planning vehicle, whether or not this estate planning tool fits in each case. In addition, nonlawyers, such as life insurance agents and financial planners, tout the use of revocable living trusts as a panacea for a number of real or imagined ills.(fn2)
The business pages of the two Denver daily newspapers have contained ads for "free" seminars about revocable living trusts, where the public can learn about the advantages these trusts offer to save federal estate taxes and avoid probate. These seminars are produced by a team which may or may not include a lawyer. As a result, the revocable living trust has taken on the characteristics of a product which is sold in the same fashion as life insurance, IRAs and other investments.
In this author's opinion, the revocable living trust can be a valuable estate planning tool in some situations. However, it still must be considered carefully and weighed against other estate planning strategies. This article looks at the legal issues and principles involved in using revocable living trusts, along with characteristics of the alternatives to such trusts.
As indicated above, one of the currently publicized uses of revocable living trusts is that they can save federal estate taxes. One implication in the marketing materials is that there is no other way to save federal estate taxes. This notion can be quickly dismissed by pointing out that, through the proper use of testamentary trust provisions, wills can also save federal estate taxes.
The most widely publicized use of revocable living trusts is probate avoidance. Prior to the Colorado Probate Code ("CPC"), which took effect on July 1, 1974, the term "probate avoidance" was popular in discussions between attorneys and their clients. At that time, there were good reasons to avoid probate in some cases due to the rigidity and formality of probate procedures and the attendant costs of operating under probate laws.
To avoid probate, some estate planning attorneys recommended the use of revocable living trusts, frequently trusteed by the settlor. The settlor in some cases would transfer all assets to such a trust, while retaining the use and enjoyment of the trust. If the settlor became mentally incompetent or the settlor died, the assets were administered free of probate procedures because a trust was a substitute for a conservatorship and a will.
The CPC streamlined and simplified probate procedures dating back to July 1, 1974. In addition, because the CPC has been modified by amendments to address certain difficulties encountered, it is appropriate to ask whether the revocable living trust is still important as a probate avoidance device.
A personal representative of a decedent's estate is offered a range of alternatives when administering the estate: informal or formal probate, informal or formal appointment of the personal representative, administration unsupervised or supervised by the court and informal or formal closing of the estate. Whether operating informally or formally, a personal representative's fees and those of his or her agents are governed by the standard of reasonableness under CRS §§ 15-12-719 and 15-12-721.
Formerly, a rigid percentage fee schedule existed, which often over-compensated personal representatives for their services. Fees for probate are now determined on the same basis as those of trustees, which is also governed by a...
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