Many people think that trusts are only useful for wealthy people with estate tax concerns, but this is not the case at all. In fact, the revocable living trust is a versatile estate planning tool that can be ideal for a wide range of people.
In this post, we will look at four reasons why you may want to use a living trust as the centerpiece of your estate plan.
Streamlined Estate Administration Process
When you establish a living trust, you make the trust the owner of your personally held property. It would all be listed on a schedule, which would be very beneficial to the trustee who will administer the trust after your passing.
Spendthrift Protections
If you have someone on your inheritance list that is not good with money, you may be concerned about leaving this person a lump sum inheritance. They could burn through the money too quickly and have nowhere to turn when they need help in the future.
You would be allowing for lump sum inheritances if you state your final wishes in a will. There would be no spending safeguards or asset protection.
Under these circumstances, you could fund a revocable living trust instead. You could include a spendthrift provision that would protect the principal from the creditors of the beneficiary.
Plus, you can dictate terms with regard to the nature of the distributions. For example, if you have income-producing assets in the trust, you could have the trustee distribute the earnings on a monthly basis.
Many people will allow the trustee to make discretionary distributions under certain circumstances. This is one possible course of action, but you would have total control of the way that the assets are distributed to the beneficiary.
Incapacity Planning
It is not a very pleasant thing to contemplate, but cognitive impairment is quite common among senior citizens. According to the Alzheimer’s Association, about 10 percent of all seniors have the disease, and the figure swells to 32 percent for individuals that are 85 years of age and older.
If you have a living trust, you can prepare for possible incapacity. While you are alive and well, you can act as the trustee and the beneficiary. When you create the trust declaration, you can designate an incapacity trustee to manage the trust if you become incapacitated.
This can be the same individual or entity that will administer the trust after you are gone, but this is your choice.
Probate Avoidance
When a last will is used as an asset transfer vehicle, an executor that is named in the document would act as the administrator. The executor would not be able to act independently. The will would be admitted to probate, and the court would supervise during the administration process.
No inheritances can be distributed while probate is underway, and it will typically take eight months to a year if there are no complications. There are expenses that accumulate as well, and these expenditures reduce the amount of the inheritances that will be received by the heirs.
Probate is a public proceeding, so anyone that wants to find out how the assets were distributed can access the records. Finally, probate opens the door for disgruntled parties that may want to challenge the terms of the will.
If you use a revocable living trust, the successor trustee that you named in the trust agreement will be able to distribute the assets directly to the beneficiaries. The probate court would not be involved in the process.
Schedule a Consultation Today!
Our doors are open if you are ready to work with a Campbell, CA estate planning lawyer to put an estate plan in place. When you work with our firm, your plan will be personalized, and it will be custom-crafted to suit your specific needs.
You can send us a message to set up a consultation appointment, and we can be reached by phone at 408-356-9200.
