There are many different tools in the state planning toolkit, and you should understand them thoroughly so that you can make totally informed choices. Far too many people assume that a last will is the only way to go if you are not a multimillionaire, but this is really not the case.
A revocable living trust is a very good alternative to a last will for a number of different reasons. First and foremost, when a will is utilized, the executor that is named in the document must admit it to probate. Subsequently, the court will supervise the administration of the estate.
After a will is admitted to probate, creditors are given four months to come forward seeking satisfaction. There is a certain caseload that the court must handle, and there are many tasks that must be completed by the executor while the probate process is underway. Start to finish, you are looking at seven months to a year for probate to run its course.
This is not good news for the heirs to an estate, because no inheritances can be distributed until the estate has been probated and closed by the court. The waiting game is not pleasant, and there is another major drawback.
As we have stated, the executor has a lot of work to do, and he or she will be writing a lot of checks. In many if not most cases, property liquidation is necessary, so there will be appraisal fees, liquidation expenses, and commissions in some cases. A probate attorney may be engaged, so there can be legal fees, and the executor may bring in an accountant as well.
Of course, the executor does not work for nothing, and the court charges a filing fee. All of these expenses can add up to consume a significant portion of the estate, and much of this is money that could have gone to the rightful inheritors.
When a revocable living trust is used instead of a last will, all of these pitfalls are avoided. The trustee that is empowered to administer the trust can distribute assets to the beneficiaries free of the costly and expensive probate process. The facilitation of probate avoidance is one of the major reasons why people create revocable living trusts.
If you use a last will to state your final wishes, the people that are named in the will would get lump sum inheritances. This may not be to your liking for one reason or another. You could have a family member that has a history of poor money management. There can also be concerns about people that are simply not very experienced when it comes to handling large sums.
A revocable living trust can be the ideal solution when these circumstances exist. To explain by way of example, let’s say that you want to protect a spendthrift heir. You have conveyed an apartment building into the revocable living trust. After expenses are paid, the rents provide $60,000 of annual income.
Instead of giving the building to the person outright, you could instruct the trustee to distribute $5000 to the beneficiary each month. A steady stream of income would be there, but the apartment building would remain in the trust to generate earnings on an ongoing basis. This is one example, but the point is that you can instruct the trustee to distribute assets in any manner that you choose.
Everyone has heard of Alzheimer’s disease, but many people are quite surprised when they find out how widespread it has become. According to the Alzheimer’s Association, four out of every 10 people that are 85 years of age and older have contracted the disease. Of course, Alzheimer’s is not the only cause of incapacity among elders.
You can account for this eventuality when you establish a revocable living trust. In the declaration, you can name a disability trustee that would administer the trust in the event of your incapacitation.
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