As Mount Clemens living trust attorneys, we are often asked why someone would want to use a living trust instead of a last will. After all, trusts are only for multimillionaires, right? This is the impression that many people harbor, but in fact, a living trust can be a better choice than a last will for people that are not extremely wealthy.
If you use a last will to state your final wishes in writing, you can name an executor or personal representative. This is the person that will administer the estate after you are gone. It could be natural to assume that this responsible individual would simply follow the instructions independently and do what it takes to get the assets into the hands of the heirs that are named in the will.
In fact, things do not work this way, because there are laws that enter the picture. If an estate administrator could act without supervision, where would that leave creditors that were owed money by the person that passed away? Plus, there would be no oversight with regard to the actions of the executor, and it would be difficult for interested parties to know exactly what took place.
To respond to the above, there is a legal process called probate. Under the laws of the state of Michigan, the personal representative would be required to admit the will to probate. The hands on estate administration tasks would be undertaken by the executor, and the overall administration of the estate would be supervised by the court.
Notifications must be posted to make creditors aware of the fact that individual in question did indeed expire. They are given a certain amount of time to come forward, and the estate liquidation tasks can be time-consuming, because property does not sell at a fair price overnight. In some cases, there can be complications and disputes among interested parties that can slow things down even more.
Even if everything goes as smoothly as possible, probate will typically take about nine months to a year to run its course. The rightful heirs to the state cannot receive inheritances while the estate is being probated by the court, so this a pretty long period of time to wait for a bequest.
In addition to the time factor, there is also the matter of money. There are a slew of different expenses that present themselves during the probate process. These would include court costs, legal fees, appraisal and liquidation expenses and commissions, and other expenses that may arise. All of this money that is spent during probate could have otherwise gone to the heirs to the estate.
Probate records are available to the general public. Anyone who is interested in the way that you distributed your resources can find out, and this loss of privacy is another drawback. Finally, probate opens a window of opportunity for disgruntled parties that may want to challenge the validity of the last will.
All of these pitfalls are avoided when a living trust is utilized instead of a last will. The property that is contained within a living trust can be distributed to the beneficiaries by the trustee outside of probate.
If you were to use a living trust as your vehicle of asset transfer, you could include spendthrift protections. For example, let’s say that your adult daughter is not very good at handling money. You are concerned about leaving her a large, lump sum inheritance. To protect her for the long haul, you could instruct the trustee to distribute assets to her on a monthly basis for an extended period of time. On the other hand, with a last will, you would be leaving lump sum inheritances.
A very significant percentage of elders become unable to manage their own financial affairs at some point in time. About 40 percent of people that are at least 85 are suffering from Alzheimer’s disease, and this is not the only cause of incapacity.
If you have living trust, you would typically act as the trustee while you are alive and well, and this is a major positive, because there is no loss of control. However, you could empower a disability trustee to administer the trust in the event of your incapacitation.
Learn More About Living Trusts
Our Mount Clemens living trust attorneys have prepared a free worksheet that can provide you with an outstanding template as you are devising your plan. It is free, and you can visit this page to get your copy.