The most important decision you will make when you are getting your affairs in order is which legal device will serve as the centerpiece. Many people automatically assume that you should use a will because they have misconceptions about trusts.
For example, the idea that trusts are not useful unless you are a millionaire… This is patently false, because there are different types of trusts that satisfy very different objectives.
Aside from a simple will, the most commonly used estate planning document is a living trust, and we will highlight the differences here so you can make informed decisions.
Lengthy Estate Administration and Limited Options
If you state your final wishes in a will, it would be admitted to probate. This is a legal process that takes place under the supervision of a court.
In the document, you would name an executor to act as the estate administrator, and this individual would complete the hands-on administration tasks. The assets would be identified and prepared for distribution, and final debts would be paid during probate.
This is a time-consuming process that will take eight months at minimum, and it can take considerably longer under some circumstances. No inheritances are distributed until the court has closed the estate, so the inheritors have to wait it out.
Probate is a public proceeding, so anyone who wants to find out how the assets were distributed can access the records. Expenses accumulate while the estate is being probated – that is a huge downside.
Eventually, the assets will be distributed to the heirs, and they would receive lump sum inheritances all at once. There would be no asset protection or controls going forward, so heirs who are not good with money could burn through their inheritances far too quickly.
Revocable Living Trust
Aside from the idea that trusts are only used by very wealthy people, another myth is the notion that you lose control of assets that you convey into a trust. When you establish a revocable living trust, you continue to buy and sell your property as you always have. While you’re alive, you are the Trustor, the Trustee and the Beneficiary of your revocable living trust.
In the trust, you would name a successor to assume that role after you are gone. You can use someone who you know personally, or you can engage a professional such as a trust company or the trust section of a bank.
You can determine how you want the assets to be distributed to the beneficiaries. For example, you can instruct the trustee to distribute a certain amount each month until the beneficiaries reach certain age thresholds. This is just one possibility, but the distributions schedule is up to you.
When it comes to the estate administration process, living trust distributions are not subject to probate, so those hassles and fees are avoided.
Since all the assets that comprise the estate would be titled to the trust, the process is streamlined for the trustee, and this works in the beneficiaries’ favor.
Another positive is the ability to account for possible incapacity. Alzheimer’s disease is common later in life, and it is not the only cause of cognitive impairment. You can name a disability trustee to fill the role if it ever becomes necessary when you establish the trust.
Need Help Now?
If you are ready to work with an attorney to put a plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 913-262-2000.