A lot of people think that you create a will, and you have planned your estate effectively; that’s all there is to it. This is why many individuals buy into the notion that you do not need an estate planning attorney. They think they can simply download a generic template form off the internet, fill in the blanks, and be done with it.
The truth is that there are a number reasons why it is not that simple, including the facts that each case is different and each jurisdiction has different expectations, so there is no true one-size-fits-all document.
But in addition to this, you may not want to create a will at all. If you utilize a last will as your primary vehicle of asset transfer, your estate will have to go through the legal process of probate. During this time the probate court in the jurisdiction that is local to you determines the validity of the will and supervises the administration of the estate.
The problems with probate are threefold. For one, it can take months to years for the estate to be probated and closed and the heirs to the estate do not receive their inheritances until the process has been completed. Secondly, probate is potentially expensive. Costs incurred during probate can consume perhaps two percent to five percent of the overall value of your estate, and sometimes even more. And finally, probate opens the door to those who would like to challenge your wishes.
The good news is that there are a number of ways to avoid probate, and some of them are rather simple. Payable on death accounts are bank accounts or brokerage accounts that are transferred into the name of a beneficiary at the time of your death. This transfer takes place outside of probate. Another way to get assets into the hands of your loved ones directly is through the purchase of life insurance. You can also give gifts while you’re still alive within certain limits as a way to transfer assets outside of probate.
These are all possible solutions, and there is certainly nothing wrong with gift giving or life insurance. However, payable on death accounts have severe limitations, and they can be risky. In some cases, you could add multiple beneficiaries, but they would receive equal distributions of the assets that remain in the account. This may not be in accordance with your wishes.
When it comes to the risk factor, some people name a single beneficiary to a payable on death account. The person that is chosen is instructed to distribute the assets certain way after the death of the original account holder. After the death of the individual in question, the beneficiary would be under no legal obligation to follow the instructions that were given. As a result, family members could be disinherited.
For most people that would like to avoid probate, a revocable living trust would be a far better choice. You do not have to worry about losing control of assets that you convey into this type of trust, because it is in fact revocable. If you ever want to dissolve the trust and take back personal possession of assets that you conveyed into it, you are free to do so at any time.
In addition to the power of revocation, you have total control while you trust is intact. If you establish a living trust, you are called the grantor of the trust. The trustee administers the trust, and the beneficiaries can receive monetary distributions from it. You can act as the trustee and the beneficiary while you are alive, see you have total decision-making authority, and you have access to assets in the trust.
The purpose of the trust this to serve as an estate planning vehicle, so you have to name a successor trustee to administer the trust after you are gone. Your heirs would be the successor beneficiaries. When you name a successor trustee, you can name someone that you know personally, but there is another option. Trust companies and banks offer trustee services, and this can be a better choice for many people.
After your passing, the trustee would distribute assets to the beneficiaries in accordance with your wishes. The probate process would not be a factor so the pitfalls of probate would be avoided.
Learn More About Estate Planning!
As you can see, yes, you can create a will, but there are better options. If you would like to learn more about them, attend one of our upcoming seminars. There is no charge, but we do ask that you visit this page to register for the seminar that fits into your schedule.