Covid emergency planning

Wills and Trusts: Why the Revocable Trust Wins

Wills vs. Trusts

Before the Covid-19 pandemic, I used to talk clients out of revocable living trusts – unless there was a serious enough “trigger” that necessitated the added expense and retitling of assets. In order for a Trust to make sense to my younger clients especially, multiple boxes had to be checked. However, the coronavirus has brought into sharp focus the superiority of the trust as a wealth transferring vehicle.

I never anticipated a statewide shutdown of the courts. The New York State Unified Court System was almost completely shuttered due to this biological pandemic. All courthouses were physically closed to the public on March 16th and only the Judges declared they were only hearing “essential matters.” Most Surrogate’s Courts, which is where estate matters are heard, did not deem new estate petitions essential until just this week. In our immediate area, Manhattan and the Bronx were the only such courts taking on new estate matters prior to this week, and even they are only accepting the simplest petitions. Starting May 18th all counties are mandated to accept new estate filings – but only those where the death is covid-19 related. Therefore, for two months nothing could be done about probating a will or administering an estate. It has been an embarrassing disaster for the courts, who were ill-equipped to operate remotely.

Revocable Trusts Avoid Probate

The superiority of the revocable trust over a Will lies in the avoidance of Probate. The common reasons for recommending a trust still remain—disinheriting a natural heir, leaving assets to a friend or domestic partner, privacy—but sidestepping the need for judicial intervention has become even more pronounced during this state of emergency. The most compelling arguments in favor of a trust have always been to avoid ancillary probate on out-of-state property, plan for incapacity, and to ensure smooth continuity of rental income property or a business. Anytime there is a need for seamless transition, a trust is the better choice. Anyone having to probate or administer an estate under any of these latter scenarios has been forced to wait these two months (and counting) to even begin the process, not to mention will have to face the backlog caused by the thousands of covid-19 related deaths.

A more mundane negative effect has been the strain on family members forced to cover the cost of multiple residences, a burden made more onerous due to widespread unemployment. For example, if a single person passes away, utilities, mortgage payments and other bills may be due. Putting an estate proceeding on hold means children or siblings have to pay those bills – or let them linger.  One quick fix is to make sure that loved ones have access to some cash through either a joint bank account or transfer on death designation.

Revocable Trusts for Parents

Many of my clients with minor children have expressed concern regarding nominated guardians in their Wills– who would take care of their children if the Will cannot be submitted to probate? I am confident that assigning a guardian for a minor child would be deemed an “essential” matter in any county. The nominated guardian would move for guardianship in the Family Court – which moves more quickly that surrogate’s court. Also, it is best practice to execute a Nomination of Guardian form, in addition to any Will, which is good for 60 days without court intervention. Any assets left to the child would still need to pass through probate so funds would still be held up. If the guardian or family member does not have sufficient funds of their own on hand – a revocable trust may be prudent.

I am not advocating everyone should have a revocable trust. I still only recommend it for people whose beneficiaries may need quick access to assets – but in those cases, I now strongly recommend it. My capacity for imagining worst case scenarios, under which the court cannot maintain continuity, has expanded.

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