There is a commonly held misconception that many people harbor about estate planning. A will is looked upon as a simple document that you can use to state your final wishes in a simple and straightforward manner.
Trusts are perceived as complicated devices that are used by very high net worth individuals that have estate tax concerns.
These assumptions are false. The administration of a will is not that simple at all, and there are trusts are very useful for people that are not extraordinarily wealthy.
The Probate Process
If you use a will as your asset transfer vehicle, you would name an executor in the document. The will would be admitted to probate, and the court would supervise during the estate administration process.
Creditors are given time to come forward seeking payment, and the executor will identify, secure, and inventory the assets. If liquidation of property is necessary, the executor will handle it, and they will open an estate bank account and pay all final debts.
The executor will be the point of contact for people that have an interest in the estate, so the individual should be a patient and diplomatic communicator.
There is a proving of the will during probate. The court examines the will to determine its validity, and if anyone wants to contest the terms, they can make a case while the estate is being probated.
After about nine months at minimum, the inheritors will receive their inheritances. The records are available to the general public, so there is a disturbing loss of privacy to punctuate a time consuming and costly process.
Revocable Living Trust
Ironically, if you really want to keep it simple, you should use a revocable living trust instead of a will. In a very real sense, nothing changes when you have a living trust. You simply make the trust the owner of the assets that you convey into it, but you would act as the trustee.
Complete control of the assets will be in your hands every step of the way, and you can revoke the trust at any time if you choose to do so. When you establish the trust, you name a successor trustee to assume the role after your passing.
The ideal successor will depend on the circumstances. A beneficiary can potentially be the successor trustee, and this can be the right choice when the family dynamic is resonant.
In some cases, an objective party with no conflicts of interest will be a better choice. It can be someone that you know personally, and trust companies and other professional entities provide trustee services.
There are peace of mind advantages in the near term while you are still living. If you have a minor on your inheritance list, you can include a child’s subtrust within your living trust.
The successor trustee would be able to manage the assets on behalf of the child while they are a minor. You would dictate a certain age at which the child would be able to directly access the resources when they are an adult.
Another advantage is the ability to prepare for possible incapacity. Over 30 percent of people that are 85 years of age and older have Alzheimer’s disease, and this is not the only cause of cognitive impairment.
Your successor trustee could be empowered to manage the assets in the event of your incapacity.
From an estate administration perspective, after your passing, the trustee would be able to distribute assets to the beneficiaries outside of probate. This would simplify and streamline the process, and your loved ones would receive their inheritances in a more timely manner.
Attend a Free Webinar!
We are conducting a series of webinars over the coming weeks, and they cover some very interesting and important estate planning topics. There is no charge to attend the sessions, so this is a great way to build on your knowledge.
You can see the dates if you visit our Los Angeles estate planning webinar page, and when you identify the session that works for you, follow the instructions to register.
- Consider Taxation When You Choose a Retirement Destination - October 21, 2021
- Why Do You Need an Estate Plan? - October 19, 2021
- Consider the Impact of Alzheimer’s Disease - October 18, 2021
