A lot of people that have always assumed that they should use a last will go in a different direction when they learn all the facts. The revocable living trust is an alternative that is far more beneficial for a wide range of people. Let’s look at three reasons why you may want to use a living trust as the centerpiece of your estate plan.
Probate Avoidance
If you use a last will to state your final wishes, you would name an executor to serve as the administrator. This person would not be able to act independently, and this comes as a surprise to many. The will would be admitted to probate, and the court would provide supervision during the administration process.
It serves a purpose, because it gives creditors a chance to come forward seeking satisfaction before the assets are distributed to the heirs. In addition to this function, there is a “proving of the will” during probate. The court examines the will to make sure that it is valid, and if anyone wants to contest the will, they can come forward to make their case.
Though the process serves a purpose, it is not necessarily positive for the rightful heirs to an estate. Probate can take close to a year in many instances, and no inheritances are distributed while the estate is still open. There are a lot of expenses that accumulate during probate, and the records are available to the general public.
The administration process is entirely different when a revocable living trust is utilized. After the death of the grantor of the trust, the trustee would be able to distribute assets to the beneficiaries outside of probate. As a result, these drawbacks would be avoided.
Spendthrift Protections
You may have a reason to be concerned if you are going to be leaving money to a family member that is prone to reckless spending. People that are prone to this behavior often need financial help, and you will no longer be around to provide assistance if they burn through their inheritance too quickly.
If you use a living trust instead of a last will, you can account for a situation like this. You can include a spendthrift provision, and this would protect the principal from the beneficiary’s creditors. In the trust declaration, you could instruct the trustee to distribute limited assets over an extended period of time.
For example, let’s say that you have income-producing assets in the trust. You could instruct the trustee to calculate the anticipated annual earnings, and divide the number by 12. You could allow the beneficiary to receive that much each month, and the trustee could be given the ability to make additional discretionary distributions.
This is one example, but the point is that you can dictate the terms of the distributions. It should be noted that you can potentially use a professional fiduciary like a trust company to act as the trustee. In this manner, there would be no conflicts of interests or heartstrings that could be tugged by the beneficiary.
Consolidation of Assets
Another benefit that you gain when you use a revocable living trust is the streamlining of the estate administration process. When all or most of the assets that comprise your estate are owned by the trust, the trustee will walk into an orderly, efficient situation.
You can account for assets that may be in your direct personal possession when you pass away through the addition of a pour over will. This document would allow the trust to absorb assets that were in your direct personal possession at the time of your passing.
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If you already know enough to recognize the fact that you would like to put an estate plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 631-265-0599.
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