The most commonly held misconception about estate planning is the idea that trusts are only useful for a small percentage of people that have very complicated estate planning objectives.
There are definitely trusts that are used by individuals that are in unusual situations. This being stated, the revocable living trust is an estate planning device that can be extremely useful for “the rest of us.”
If you have always thought that you would be using a simple will, you may change your mind after you learn about some of the advantages that living trusts provide.
1. No Loss of Control
It is important to understand the fact that you do not lose access to the assets that you convey into a revocable living trust. While you are alive and well, you would be the trustee and the beneficiary, so in a real sense, nothing changes in your day-to-day life.
You can revoke the trust or change the terms at any time, and you can convey property into the trust after it has been created whenever you choose to do so.
2. Consolidation of Assets
When you create the trust declaration, you name a successor trustee to manage the trust after your passing, and your heirs would be the beneficiaries. The trustee would step into a turnkey situation, because the trust would be the owner of the property that is going to comprise the estate.
3. Probate Avoidance
Probate is a legal process that takes place under the supervision of a court. When a will is utilized, the probate court would preside over the administration process. The actual hands-on tasks would be completed by the executor that is named in the document or a court-appointed personal representative.
This process will typically take eight or nine months or longer to run its course. No inheritances are distributed until the estate has been probated and closed by the court. This is a long time to wait for an inheritance, and probate expenses reduce the value of the estate along the way.
Anyone that wants to find out what transpired can access probate records, so there is a loss of privacy, and that is another drawback. It also opens a window of opportunity for disgruntled parties that may want to challenge the will.
If you use a living trust as the centerpiece of your estate plan, the trustee would be able to distribute resources in accordance with your wishes outside of probate.
4. Incapacity Planning
A very significant percentage of elders become unable to handle their own affairs eventually due to Alzheimer’s induced dementia or some other condition. You can account for this possibility if you have a living trust.
When you establish the trust declaration, you could name an individual or a professional fiduciary to act as the trustee if you become incapacitated. This disability trustee can be the person that will assume the role after your passing, but this is not a requirement.
5. Spendthrift Protections
If you have someone in the family that is not good with money, the thought of leaving them a lump sum inheritance may be disconcerting. You can account for this when you have a living trust.
A spendthrift provision would protect the principal from the beneficiary’s creditors, and you can provide instructions for the trustee with regard to the nature of the distributions. For example, you could allow for a certain amount to be distributed each month until the beneficiary reaches a certain age.
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A living trust can be the ideal estate planning tool for a wide variety of people, but there are other options. The right way to proceed will depend upon the circumstances, and this is why it is important to discuss your situation with a licensed estate planning attorney.
If you would like to learn more about living trust estate planning, we regularly offer a free living trust webinar so you can learn from the comfort of your home. Attendees of our webinars are offered a free attorney consultation. To see a schedule of our upcoming webinars and to register, follow this link.