You may think that you do not need a revocable living trust if your estate falls below the federal estate tax exemption. After all, a large number of Floridians’ personal estates fall below that $5.34 million individual threshold. Although most estate planning professionals encourage the use of living trusts for estate tax avoidance, there is one other benefit: Trusts help keep your estate out of probate court.

Estates are sent to probate court in order to distribute assets after a benefactor’s death. The use of a revocable trust can help avoid a long, expensive courtroom process by streamlining the distribution of your holdings. Probate can cost up to 3 percent for the first $1 million that is handled through the courts. Compare that to the modest cost of setting up a revocable living trust — usually less than $2,500 — and the benefits of this estate planning tool quickly become obvious.

Revocable living trusts are one popular option, but there are also other ways to ensure that your estate stays out of probate. First, you could choose to simply pursue joint ownership of your assets. In that case, the holdings would simply transfer to the other party after your death. An account that is designated as “payable on death” can also help avoid costly probate expenses. This type of estate planning tool allows benefactors to arrange an automatic transfer of assets through their bank or financial brokerage.

Choosing a revocable living trust or a similar estate planning tool will help limit family disputes over money, issues with financial institutions and concerns about creditors. Further, snowbirds can utilize a revocable living trust to help avoid estate taxes in their northern home states. For the record, Florida does not have a state estate tax.

Luis E. Barreto