People often make assumptions about estate planning that lead to errors that can yield negative consequences. In this post, we will share three of them so that you can steer clear of these traps that can ensnare you.
Trusts Are Only Useful for Wealthy People
One misconception that many folks embrace is the idea that a trust is never appropriate unless you are extremely wealthy with a complicated portfolio. While it is true that individuals that are in this position do use trusts, but there are numerous different types of trusts.
Some of them are ideal for people of relatively ordinary means. The most commonly utilized trust is the revocable living trust, and when you understand the benefits, you will see why they are so popular.
If you use a will instead of a trust, it would be admitted to probate. In the state of New York, probate matters are handled by the Surrogate’s Court. The executor would take care of the administration tasks, and the court would provide supervision.
This process is time-consuming; it will take at least nine months, even if things go smoothly. The executor cannot distribute inheritances while the process is underway. Considerable expenses accumulate during probate, and privacy is lost, because probate records are available to the general public.
The situation is entirely different if you use a revocable living trust as the centerpiece of your estate plan. You would lose no control of assets that you convey into it while you are living, because you would be able to serve as the trustee and the beneficiary initially.
In the trust declaration, you would name successors to assume these roles after you are gone. When the time comes, the trustee would distribute the assets to the beneficiaries in accordance with your stated wishes. The probate court would not be involved.
The avoidance of probate is one advantage to be gained through the utilization of a living trust, but there are several others that we will look at in a future blog post.
DIY Estate Planning
There are websites that sell boilerplate, generic estate planning documents like wills and trusts. A lot of people think that this is a great way to plan your estate in a very convenient manner.
Though this may make sense on the surface, objective experts have recommended against do-it-yourself estate planning unless the situation is very simple and straightforward. When you are arranging for the passing of your legacy, is it really wise to roll the dice with a random DIY document?
Overly Simplistic Probate Avoidance Notions
Some people hear about the drawbacks of probate and they decide to implement so-called “simple solutions.” As they say, when something is too good to be true, it usually is, and the statement is applicable in this instance.
For example, it is possible to add a co-owner to the title or deed of your home. This is called the condition of joint tenancy with right of survivorship. If you predecease the other joint tenant, they would become the sole owner of the property, and the transfer would not be subject to probate.
That can sound like an ideal course of action, but if you think it through, you can see that joint tenancy is risky business. If you go this route, the joint tenant would own half of the property immediately. As a result, if they run into legal or tax difficulties, their portion of the property could be attached.
This is one of these simplistic approaches that can backfire mightily, and there are several other flawed solutions that people often embrace. There is no reason to take any risks when qualified estate planning assistance is always available.
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