Far too many people make assumptions about estate planning. The one that is at the top of the list is the idea that a last will is the right choice as an asset transfer vehicle. In fact, for most people with a reasonably significant store of resources, a revocable living trust is a better choice for a number of different reasons.
Consolidation of Assets
If you were to use a last will as the centerpiece of your estate plan, the executor that you name in the document would have to identify and inventory all of the assets that comprise the estate. This can be time-consuming and complicated.
Things are entirely different with a revocable living trust. All of the assets would be consolidated in one place, so the process would be simplified.
When it comes to assets that may have never been conveyed into the trust, you can include a pour over will in your estate plan. This will allow the trust to absorb resources that were not conveyed into it during your lifetime.
Control and Flexibility
Another benefit of a living trust is the level of control that you maintain. Since the trust is revocable, you have the power to dissolve it and take back direct personal possession of the property that has been signed over to it at any time.
You can also act as the trustee and the beneficiary while you are living, so your control is absolute while the trust is intact. It is possible to change the terms at any time, and you can add or remove property whenever you choose to do so.
According to the Alzheimer’s Association, one out of every 10 senior citizens has contracted the disease. The figure rises to 40% for people that are 85 years of age and older. Clearly, people with dementia will become unable to handle their own affairs at some point in time.
And of course, people become incapacitated due to other underlying causes. To account for this possibility, when you have a living trust, you can name a disability trustee. This person or entity would be empowered to administer the trust if you ever become incapacitated.
When you establish a living trust, you can include spendthrift protections if you have concerns about the money management capabilities of a beneficiary. For example, you can instruct the trustee to distribute the earnings from assets in the trust on an incremental basis. In this manner, the principal would remain intact to continue to provide income for the beneficiary.
You could also allow for larger lump sum distributions when the beneficiary reaches certain age thresholds. These are just hypothetical examples, but the point is that you determine how the assets will be distributed to the beneficiary or beneficiaries.
The probate court would supervise the administration of the estate if you utilize a last will instead of a living trust. There are some drawbacks that go along with the probate process. For one, it can be quite costly, and the money that is spent during probate reduces the amount of the inheritances that will be received by the heirs.
Probate is also time-consuming. An uncomplicated case will usually take about nine months to a year to run its course. Privacy is lost during probate as well, because anyone that is interested can access probate records to find out how the assets were distributed.
All of these negatives are avoided if you use a living trust instead of a last will. The trustee would be empowered to distribute assets to the beneficiary or beneficiaries in accordance with your wishes outside of the probate process.
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