A revocable living trust is the ideal estate planning tool for the vast majority of people with a reasonable store resources. This type of trust provides many benefits, and we will look at them in this blog post.
One major benefit is the consolidation of assets. If you were to use a last will as your primary estate planning vehicle, you would name an executor in the document. This individual or entity would handle the estate administration tasks. The first order of business would be for the executor to identify and inventory all of the assets that comprise the estate. When they are scattered about without any orderly connectivity, this can be a difficult task that is quite time-consuming.
You can simplify things for the administer if you convey everything that you want to pass along to your loved ones after you are gone into a revocable living trust. If you were to do this, the trustee that you name would instantly be able to gain an understanding of the assets that are owned by the trust. This would make the estate administration process much more efficient and streamlined.
Of course, there could be resources in your personal possession that you never conveyed into the trust for one reason or another. To account for this, when you are devising your estate plan, you can including document called a pour-over will. This would allow the trust to absorb assets that were in your personal possession at the time of your passing.
In addition to the consolidation of assets, the avoidance of probate is another major benefit that goes along with the creation of a revocable living trust. This is a legal process, and in the state of New York where we practice law, the Surrogate’s Court is charged with the responsibility of probating estates. There are three primary reasons why many people take steps to facilitate asset transfers outside of the probate process.
First, there is a loss of privacy. Anyone that has an interest can obtain probate records to find out how you distributed your assets. Most people like to keep their financial affairs confidential, so the loss of privacy is disturbing in a general sense. This being stated, the information can potentially cause hard feelings among interested parties.
The second probate drawback is the time consumption. No inheritances can be distributed until the estate has been probated and closed by the court. In New York, even if there are no complications, it will take about nine months to a year for the probate process to run its course. This is a rather long time to wait for a rightful inheritance, and it can create hardships for individuals that may have been relying on the decedent for support.
Expenses pile up during probate that reduce the value of the estate before it is distributed among the heirs. These would include liquidation and appraisal expenses, the executor’s remuneration, legal fees, and court costs. In a very real sense, all of this money is coming out of the pockets of people that are named in the last will.
The situation is entirely different with a revocable living trust. If you establish this type of trust, you can act as the trustee and the beneficiary while you are alive. In the trust declaration, you name successors to assume these roles after you pass away. After you are gone, the trustee would distribute assets to the beneficiaries in accordance with your wishes as stated in the trust declaration. Probate would not be a factor.
Another benefit that you gain if you use a revocable living trust instead of a last will is the ability to include spendthrift protections. For example, you could instruct the trustee to distribute a certain amount each month, and allow for additional distributions on a discretionary basis. This would prolong the viability of the trust and protect the interests of a family member that is not very good at managing money.
Attend a Free Seminar!
We are holding a number of estate planning seminars in the near future, and you can gain a great deal of useful knowledge if you take the time to attend one of these sessions. They are being offered free of charge at the present time, but we do ask that you register in advance, because seating is limited. To see the schedule and obtain registration information, visit our seminar page.