With the click of a mouse, there is a great deal of information at our fingertips about trusts and estate planning. Amidst this vast amount of information, there are some common misconceptions. One such misconception is that a revocable trust is about whether to use a Florida revocable trust for a “small estate”. The misconception is that a trust in general is only appropriate for larger estates.
For a prudent estate planning attorney in Florida, this kind of casual advice is NOT acceptable.
Questions like this should naturally lead to more questions such as what constitutes a small estate AND what other issues are involved that may warrant an effective revocable trust plan. The quick answers and judgments, at best, should be considered “casual advice”. Unfortunately, in legal matters, casual advice often does more harm than good.
The poet Rumi had something to say about the human tendency to give and follow casual advice:
“You have lost your camel, my friend. And all around you people are full of advice. You don’t’ know where your camel is. But you do know that these casual directions are wrong.” Rumi
Using a Florida Revocable Living Trust for a Small Estate
There are 3 reasons why preparing a Florida revocable living trust may be even more important for a small estate than for a large estate.
It is a common mistaken belief that “estate planning” only applies to the wealthy. A related misconception is that trusts are only appropriate for those who have millions of dollars. This is simply a myth that need to be dispelled with some facts. To think that a family trust is something reserved for the likes of the Kennedys is to misunderstand some of the most important aspects of trust planning.
Every estate plan in case specific and should be evaluated based upon the circumstances.
There are situations where a large estate may benefit less from a revocable trust plan than a much smaller estate.
For example, underage or immature beneficiaries OR beneficiaries with special needs in Florida often warrant the use of a revocable trust plan. Asset protection, estate tax planning, business succession planning in Florida or second marriages in Florida are also factors that may warrant a Florida revocable trust plan.
3 Ways Small Estates Can Benefit from a Revocable Living Trust
1. Small estates do not have the luxury to pay seasoned experts to resolve issues with the estate.
Often times, small estates can become every bit as complicated as large estates. For example, issues with numerous beneficiaries can arise or creditors can come out of the woodwork. If there was no trust planning then all of these issues must be resolved in a Florida probate administration through the court system and regardless of the size of the estate, if things get complicated it will get expensive to resolve. The problem is that small estates often do not have the budget for this work and the proceeds to beneficiaries can be become very minimal or even extinguished by legal fees and court costs. These scenarios can be minimized or eliminated by proper trust planning.
2. Probate requires a lot of time and this burden can be more traumatic for small and medium sized estates than for larger ones.
To add to the reasons discussed above, small estates may need to liquidate assets quickly in order to create cash flow and this can become difficult where an probate process has been required and the parties are all awaiting a court order before real property can be sold or other assets liquidated. Larger estates can often hold and bear this burden easier than smaller estates.
3. It can be more difficult to obtain help with smaller estates than larger ones.
Simply put, lawyers and accountants swoon to scoop up the larger estates for the simple reason that they are a big payday. On the other hand, smaller estates may be shunned as unattractive and families can face frustration in finding competent counsel and estate tax advice in settling these estates. For this reasons, family members seeking to resolve small estates often need to advance fees out of pockets to procure the professional assistance that is needed.
As for Rumi, his point is well observed. Many people simply follow the crowd, going along the path of least resistance and thus avoiding planning and this is especially prevalent in smaller estates.
The path of intentionality is required to really engage in your estate planning. I contend that the naysayers suggesting that trust planning isn’t necessary for small estates have not considered these and other questions and simply may be those who are “full of advice”, but you know that these casual directions are wrong.
So consider this a simple reminder to be intentional in your life, your family and your planning.
This is an updated version of an original post dated November 14, 2014.