A lot of people assume that a last will is the right estate planning document to use unless you are very wealthy with a complicated estate. This is a misconception, because there are trusts that are useful for people that are not multimillionaires.
The one that is the right choice for the widest range of people is the revocable living trust. Let’s look at four compelling reasons to use a living trust as the centerpiece of your estate plan.
Consolidation of Assets
If you maintain direct personal possession of many different types of property, and you use a last will to direct its transfer after you are gone, think about the executor’s position. The person that you name as executor would have to try to identify and inventory all of these separate pieces of property.
Obviously, it can be done, and it’s not rocket science as they say, but this scattered approach is not very efficient. On the other hand, if you convey the property that is going to comprise your estate into a revocable living trust, there would be a schedule of assets that are in the trust.
Ownership documents would indicate that the trust owns the property. This would streamline the trust administration process and make the trustee’s job that much easier. The beneficiaries that you name in the trust would be able to receive their inheritances in a more timely manner.
Speaking of time, if you use a last will to record your final wishes, the executor would admit the document to probate. The court would supervise the proceeding, and creditors would be given an a certain amount of time to come forward seeking satisfaction.
Assets would not be distributed until the estate was closed by the court. This will usually take at least nine months in most jurisdictions.
In addition to the time consumption, there are numerous expenses that accumulate during probate. These would include court costs, attorney fees, accounting charges, the executor’s remuneration, appraisal fees, and liquidation costs.
Probate records are available to the general public. Anyone that wants to find out how the resources were distributed could access these records to find out the details.
The loss of privacy is less than ideal in a general sense. Plus, the information could lead to hard feelings among interested parties. Another pitfall is the fact that probate opens a window of opportunity for disgruntled parties that may want to challenge the terms of the will.
When a living trust is utilized instead of a will, these negatives are not a factor. The trustee would be able to distribute assets to the beneficiaries outside of probate.
When you establish a revocable living trust, you can act as the trustee while you are alive and well. This should be comforting if you are thinking that you lose control of assets that you convey into a trust.
Unfortunately, a significant percentage of elders become unable to make sound decisions at some point in time due to cognitive impairment. To account for this, you can name a disability trustee that would step in to assume the role if you ever become unable to manage the trust effectively.
It can be disconcerting to leave a significant direct inheritance to someone that is not good with money. You can account for this if you use a revocable living trust with a spendthrift provision.
The principal would be protected from the beneficiary’s creditors, and you could instruct the trustee to distribute limited assets over an extended period of time. For example, you could allow for the earnings from the trust to be distributed while the principal remains intact to generate ongoing income.
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If you would like to discuss your estate planning objectives with a licensed attorney, we are here to help. You can schedule an appointment in Essex Junction Vermont at 802-879-7133, and if you would like to send us a message, there is a contact form on this website.