More people in Virginia are questioning whether a revocable trust is truly the best way to go. The ease and flexibility that comes with a TOD have become increasingly alluring to many, but is it worth it?
What do TOD accounts and revocable trusts do?
One thing they have in common is they both assist with passing down your assets. They also provide a way of getting around probate.
Both a TOD account and a revocable trust can be used to make the process of transferring assets to your beneficiaries smoother and more efficient. The flexibility of a TOD account versus a revocable trust is what draws many people to this option.
What are the drawbacks of TOD?
Of course, there’s a catch. A TOD designation might not provide all the coverage that a revocable trust would. You won’t be as thoroughly covered as you would with a revocable trust, and this could lead to issues in the process of closing the estate.
Depending on your situation, you may want to go with the trust just to make sure you have all your bases covered. Be careful not to go with the quick and easy route when a more comprehensive option would serve you better.
You might be glad that you have the revocable trust if you find yourself in a more complex estate administering scenario, such as any situation involving creditors. Whenever the decedent owed money in the form of debt, taxes and expenses at the time of their passing, it’s better to have a more robust designation like a trust.
Revocable trusts come with the benefit of planning for incapacity. This is an eventuality that virtually everyone has to factor into their planning at some point.
The advantages of having a revocable trust go beyond avoiding probate. With a trust, you can create a plan for your beneficiaries. This is especially important with minors, those with special needs, mental health issues, substance abuse or a bad history with creditors.