Most people that have not spoken with one of our Mount Clemens living trust attorneys about the matter assume that the creation of a last will is the simplest way to arrange for postmortem asset distributions. They are under the assumption that trusts are only useful for individuals that are extremely wealthy. In reality, this is not the case at all when it comes to a revocable living trust. There are a number of reasons why this type of trust is actually preferable to a last will, and we will look at four of them in this blog post.
If you were to utilize a last will as your principal vehicle of asset transfer, you would name an executor or personal representative to administer the estate after you are gone. This person would not be allowed to go about the administration tasks in a vacuum. Under the laws of the state of Michigan, a will must be admitted to probate, and the probate court must provide supervision while the business of the estate is being conducted by the executor.
There are some serious drawbacks that go along with the probate process. First, it is very likely that you want your heirs to receive their inheritances as soon as they possibly can after you are gone. When probate enters the picture, the inheritors have to play a waiting game. A simple, straightforward case can pass through probate in eight or nine months to a year in most areas, but it can take considerably when there are complications.
Speaking of complications, another pitfall is the fact that probate opens a window of opportunity for disgruntled parties that may not be happy with the terms of the will. A will contest can be initiated during probate, and this is one of the complications that can bog down the process.
Probate is not free, and this is another major negative. The court actually charges a filing fee, and the personal representative is entitled to payment for his or her time and effort. In many cases, the executor will bring in a probate lawyer, so there are legal fees to contend with as well. When you add in appraisal and liquidation charges and other incidentals, you are looking at a significant amount of money that is lost during the probate process.
When a revocable living trust is utilized instead of a last will, the trustee that is named in the document can distribute assets to the beneficiaries free of the probate process. As a result, all of these drawbacks are avoided, and this is perhaps the biggest reason why you may want to consider a living trust instead of a last will.
Unfortunately, a very significant percentage of elders become unable to make sound decisions at some point in time. There are various different underlying causes of incapacity, but Alzheimer’s disease is unquestionably the biggest culprit. It strikes about 13 percent of all senior citizens, and the number swells to 40 percent among people that are 85 years of age and older.
If you were to establish a revocable living trust, you would act as the trustee while you are alive and well. You could add a disability trustee to administer the trust in the event of your incapacity. This could be the successor trustee that will administer your trust after you die, but it could be someone else–it is your choice.
The ability to consolidate the assets that comprise your estate is another major advantage. Instead of having to manage property that is scattered about, when everything that you are passing along is in the trust, the trust administration process is streamlined. This will serve the beneficiaries well.
You may not feel entirely comfortable leaving a large, lump sum inheritance to a loved one. This is what would happen if you use a last will. Things are entirely different with a revocable living trust. It would be possible to instruct the trustee to distribute assets to the beneficiary on an incremental basis over an extended period of time. For example, you could instruct the trustee to distribute the earnings from assets in the trust that are appreciating on a monthly basis.
Download Our Free Estate Planning Worksheet!
Our Mount Clemens living trust attorneys have created a very useful estate planning worksheet that you can utilize to learn a lot about the process. If you would like to obtain access to your copy, simply click this link and enter your information into the form.