Before we drill down to the specific subject of this blog post, we should explain some of the benefits that living trusts provide. A lot of people think that a last will is the right transfer device for anyone that is not a multimillionaire, but in reality, this is a total misconception.
The distribution process is not as simple and straightforward as it may appear to be on the surface when a last will is utilized. If you were to create a last will, you would name an executor in the document to serve as the administrator. This individual or entity would not be allowed to distribute the assets independently without supervision.
Under state laws, the will would be admitted to probate. During this process, the court would determine the validity of the will and otherwise supervise the administration of the estate. This is a time-consuming process that will take nine months to a year in most instances.
Since the inheritors do not receive anything during this interim, the time lag is inconvenient at best and problematic at worst, and this is not the only negative. Significant expenses will present themselves during probate, including legal fees, court costs, the executor’s payment, accounting charges, liquidation expenses, and incidentals.
Probate is a public proceeding, so anyone that is interested in the way the assets were distributed can access the records. Plus, parties can step forward to present will challenges. They are often without merit, but nonetheless, this can slow down an already lengthy process and create a lot of headaches for the rightful inheritors.
These drawbacks are not a factor when a living trust is used instead of a last will, because the trustee would be empowered to distribute assets outside of probate. This is one advantage, but there are many others.
One of them is the ability to streamline the administration process for the administrator, because the assets that must be distributed would be consolidated. You can also include a spendthrift provision to protect the interests of a beneficiary that may not be good at handling money.
As the grantor of a living trust, you would act as the trustee while you are alive. Unfortunately, a significant percentage of elders become incapacitated late in their lives. To account for this, you could name a disability trustee when you establish your living trust.
Clearly, a living trust is a comprehensive, versatile estate planning tool that can be a far better choice than a last will.
Modifying a Living Trust
You have absolute flexibility when you establish a living trust. This type of trust is revocable, so you actually have the power to dissolve the trust entirely if you ever choose to do so.
If you want to make minor changes to the living trust, you can prepare a trust amendment that would go along with your original trust document. Another option would be a restatement of the trust, and this would be appropriate if the changes are more significant.
A third possibility would be the complete revocation of the original trust and the subsequent creation of a brand-new revocable living trust. This would only be necessary if the circumstances have changed dramatically.
Attend an Estate Event!
We frequently see the results of estate planning inaction when people come to us seeking damage control solutions. It is disconcerting to see families struggling with difficult circumstances that could have easily been avoided if a plan had been established in advance.
When people understand why estate planning is important, they tend to take action. This is why we share so much information on this website, we take these efforts a step further through the learning events that we conduct on an ongoing basis.
There can be a number of them on the schedule at any given time, and we urge you to attend the session that works for you. If you decide to join us, we ask that you register in advance so that we can reserve your seat.
To see the schedule and obtain more detailed information, visit our Smithtown, NY estate planning events page.