Many people equate estate planning with the creation of a last will. In fact, most folks with a reasonable store resources would be better served by the utilization of a revocable living trust. In this post, we will share five compelling reasons why you may want to use a living trust instead of a will.
You may have watched a movie or a television show that depicted a scene taking place after a funeral. People gather at someone’s home after the service, and certain individuals are asked to come into the study for the “reading of the will.” The implication is that the executor will read the will, and the assets will be distributed to the heirs shortly thereafter.
In the real world, things do not work in this manner. When someone passes away utilizing a last will as a vehicle of asset transfer, the executor cannot administer the estate independently. The will must be admitted to probate, and the probate court would provide supervision during the estate administration process.
Probate will take nine months to a year to run its course in most cases, and the heirs to the estate cannot receive inheritances during this interim. It is also costly, because numerous expenses accumulate, including legal fees, the executor’s remuneration, accounting and appraisal charges, and a filing fee. Plus, privacy is lost during probate, because it is a public proceeding, and records are available to the general public.
If you use a living trust instead of a last will, all of these pitfalls would be avoided. The trustee would be able to distribute assets to the beneficiaries directly, and the probate process would not be a factor.
When you establish a revocable living trust, you can act as the trustee and the beneficiary while you are living. You name successors to assume these roles after you pass away. Unfortunately, a significant percentage of senior citizens become unable to handle their own affairs at some point in time.
To account for this, you could name a disability trustee to administer the trust in the event of your incapacitation. This can be the successor trustee that will handle postmortem affairs, but you have the freedom to name someone else to serve as a disability trustee.
Consolidation of Assets
When you use a revocable living trust as the centerpiece of your estate plan, things are simple and streamlined for the trustee. If you convey all the property that will comprise your estate into the living trust, it will be easy for the trustee to distribute resources. On the other hand, when a last will is used, the executor must spend time and effort identifying and inventorying all of the assets.
If you use a last will to state your final wishes with regard to the distribution of your assets, the inheritors would receive lump sum inheritances. This can be a cause of concern if you have doubts about the money management capabilities of an heir or heirs.
Things are entirely different if you utilize a revocable living trust instead of a will. You can instruct the trustee to distribute assets on an incremental basis. For example, let’s say that you have a rental property that you conveyed into the trust that earns $5000 a month after expenses are paid.
In the trust declaration, you could advise the trustee to distribute this $5000 to a beneficiary each month. If you choose to do so, you could allow for larger, lump sum distributions when the beneficiary reaches certain age thresholds.
One of the great things about a living trust is that you have total flexibility. It is revocable, so if you ever choose to do so, you can dissolve it entirely. As we have stated, you can act as the trustee and beneficiary while you are alive and well. After the trust has been created, you can add additional property to it, and you can change the terms at any time.
Attend a Free Seminar!
Now that you know a little bit about living trusts, you may want to take the next step and build on your knowledge. Over the coming weeks, we are holding a series of seminars, and you can learn a great deal if you attend one of these sessions. They are being offered free of charge, and you can visit our seminar page to get all the details.