Many people are under the impression that a last will is the only logical choice as an estate plan centerpiece if you are not extraordinarily wealthy. In fact, this is a myth.
If you utilize a last will, your loved ones will not receive their inheritances in a timely manner. The executor that is named in the document would be required to admit the will to probate, and the court would supervise the estate administration process.
There is one caveat to the above statement here in New York. If an estate is valued at $30,000 or less excluding real estate, a simplified probate process can be available.
When the full probate process is necessary, the people that are named in the will must play a waiting game. A very simple and straightforward estate can potentially pass through probate in about nine months. This is in large part due to the fact that creditors are given time to come forward seeking satisfaction. It can take considerably longer if there is a will challenge.
In addition to this the time consumption, there are expenses that accumulate during probate. There is also a loss of privacy, because probate records become available to the general public.
All of these pitfalls can be avoided if you use a living trust instead of a last will as your primary vehicle of asset transfer. Assets in a living trust can be distributed to the beneficiaries outside of the costly and time-consuming process of probate.
Another benefit that comes along with the creation of a revocable living trust is the ability to include spendthrift protections. If you have someone on your inheritance list that is not good with money, you may not want to leave this person a direct, lump sum inheritance. When you have a living trust, you can allow for incremental distributions over an extended period of time.
The Anatomy of a Living Trust
If you were to create a revocable living trust, you would be called the grantor of the trust. The trustee is the person or entity that administers the trust, and the beneficiaries can receive distributions of assets that have been conveyed into the device. While you are alive, you can act as the trustee and the beneficiary.
In the trust declaration, you name a successor trustee to handle the administration tasks after you are gone, and you name successor beneficiaries. Any adult who is of sound mind that is willing to assume the role can act as the trustee. The correct choice will depend upon the circumstances.
As we have stated, you can act as the trustee and the beneficiary while you are alive. You can simply make the inheritor the trustee and the beneficiary of the trust. This could be logical if you are simply using the trust to avoid probate as assets are transferred to a single inheritor.
Under other circumstances, you could name someone that you know to administer the trust. If the goal is to distribute all the assets in the trust to the beneficiaries right after your passing, this would not require too much of the trustee’s time.
It is possible to name multiple trustees, but this can complicate things. However, it can be a viable option in some cases. For example, let’s say that you have two surviving children, and you have no reason to think that they will have any disagreements. You can name them as co-trustees to avoid the appearance of favoritism.
You could go in another direction and use a bank or a trust company to act as the successor trustee. However, there are significant fees involved, so it is probably not the best idea unless the estate is large, income-producing, and complicated. It should be noted that a non-institutional trustee can be empowered to engage any type of professional assistance that may be needed.
Learn More About Estate Planning!
If you would like to learn more about trust administration and many other important estate planning topics, we have a fantastic resource that you can access through this website. Our attorneys have prepared a very useful worksheet that you can use to gain a thorough understanding of the process. There is no charge for this valuable tool, and you can visit the following page to get your copy: Free Estate Planning Worksheet.
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