This post is a follow-up from a previous entry that examined certain types of asset transfers that take place outside of the legal process of probate. To provide a quick review, a will would be admitted to probate by the executor, and the court would provide supervision.
The probate process is costly and time-consuming, and probate records are available to all interested parties because it is a public proceeding. These drawbacks negatively impact the rightful heirs, so people who are aware of the problem often choose to implement some type of probate avoidance strategy.
If you create a living trust as the centerpiece of your plan instead of a will, the trustee would be able to distribute assets outside of probate, so these pitfalls would be avoided.
There are several other benefits that make this estate planning tool very appealing to a wide range of people.
If you have concerns about the money management capabilities of someone on your inheritance list, you could make this person the beneficiary of a living trust with a spendthrift clause. In the trust declaration, you could instruct the trustee to distribute the assets in any manner that you choose.
For example, let’s say that you have income producing assets in the trust. You could allow the trustee to distribute the earnings on a monthly basis to keep the principal intact to produce income. It would be possible to give the trustee the discretion to distribute portions of the principal when certain circumstances exist.
The beneficiary would not be able to directly touch the principal or corpus. Creditors of the beneficiary would “step into their shoes.” Because the beneficiary would have no access to the corpus, the same arrangement would apply to the creditors, so there would be protection on that level.
Streamlined Estate Administration
It can be quite complicated for an estate administrator to identify and inventory every asset that must be passed along to the heirs after someone dies. This process is streamlined and simplified when all the property that will comprise the estate has been conveyed into a revocable living trust.
Of course, it is quite common for an individual to pass away without conveying every single piece of property into the trust. This can be accounted for through the inclusion of a pour over will. When this type of will has been executed, the trust would be able to assume ownership of this property that was never conveyed into it.
According to the Alzheimer’s Association, over 30 percent of people who are 85 and older have contracted the disease. Of course, this is not the only cause of incapacity among elders. If you live long enough to collect Social Security, your life expectancy is in fact at least 85 years.
This is certainly not a very pleasant eventuality to consider, but it is a fact of life nonetheless. It is important to take the appropriate steps to make sure that a representative has been empowered to manage your finances if you become unable to make sound decisions at some point in time.
When you establish a revocable living trust, you would act as the initial trustee while you are alive and well. In the trust declaration, you could name a disability trustee. This individual or entity would step in to act as the trust administrator in the event of your incapacity.
It should be noted that you can add a durable power of attorney for property to name someone to make decisions with regard to property that is not in the trust. A well-constructed incapacity plan would also include a living will and a durable power of attorney for health care.
Attend a Free Workshop!
Our attorneys are holding a series of free workshops over the coming weeks, and you can learn a lot if you attend the session that fits into your schedule. We urge you to join us, because a lot of very important information will be conveyed in a down-to-earth manner.
To see the dates, visit our workshop page and follow the simple instructions to register for the session that you would like to attend.