What are some disadvantages of revocable living trusts?

For most who own real estate in California or assets in excess of $150,000, a revocable living trust helps minimize the risk of probate. However, there are still some challenges associated with utilizng a revocable living trust. 

Startup Costs

If you don't own much in the way of assets, the cost of creating a revocable living trust may not be worth the benefit. For those with small estates, the California Statutory Will, which is free, may be all that is needed.

Re-titling of Assets

Many people who are tricked into the allure of cheap document preparation services to create their trust often don't take the crucial step of re-titling assets or updating beneficiary designations.

A trust is only effective if there are assets held within it. Because this step can take time, document preparation companies are often not in a position to advise and guide you through this process. Remember, a trust is totally useless to avoid probate if it does not hold title to your assets or if it is not named as a beneficiary in your beneficiary designations.

Court Supervision

Although the main benefit of revocable living trusts is probate avoidance, sometimes clients who anticipate disagreement among beneficiaries may wish to subject the estate to probate to ensure that there will be judicial supervision. This is very, very rare, but for clients who want this, use of a revocable living trust may be a disadvantage.

Lack of Family Protection Laws

Because a trust is not subject to probate, the family protection statues (e.g., probate homestead) are not applicable. Many clients, however, consider this a benefit, as they don't want their trust assets subject to these specific laws.

Creditor's Claims

In probate there's a 4-month period after "Letters" are issued in which creditors may bring a claim. After that time, claims are cut off. In contrast, a revocable living trust requires the trustee to affirmatively take steps to file, publish, and serve notice on possible creditors to start the time limit.

Although the list of disadvantages may seem extensive, for most clients, the benefits of a revocable living trust far outweigh the downsides. In fact, for many, the need for court supervision, family protection laws, and creditor claim limitations are more beneficial in theory, than in practice.