Before we get into the specific subject that is at the core of this post, we should explain some of the reasons why you may want to use a living trust instead of a last will.
One of them is the facilitation of a streamlined estate administration process. When a will is used, the executor that is named in the document would be required to admit it to probate. This is a costly and time-consuming legal process.
In addition to the time and money that is consumed, there a loss of privacy, because probate records are available to the general public. If you use a living trust as an alternative, the trustee that you name in the document would be empowered to distribute assets to the beneficiaries outside of probate.
Another benefit is the ability to include spendthrift protections. If you have someone on your inheritance list that is not great at handling money, this can be an important consideration.
You could leave behind very explicit instructions with regard to the way you want assets to be distributed to this person. For example, you could allow for monthly distributions that come from the trust’s earnings, and the principal or corpus could remain intact.
This is one possibility, but you would have the power to include stipulations as you see fit. Through the addition of a spendthrift provision, creditors of the beneficiary would not be able to touch the principal through legal actions, and this is another benefit.
A significant percentage of elders become unable to make sound decisions at some point in time, with Alzheimer’s disease being the leading culprit. One of the nice things about a living trust is that you surrender no control, because you can act as the trustee while you are alive and well.
To account for potential incapacity, you could name a disability trustee to manage the trust if you ever become unable to do so.
Pour-Over Wills and Heggstad Petitions
Now we can move on to the point of this piece. When you hear about the value of living trusts, a question may come to mind: what happens to assets that you never conveyed into your living trust while you were living?
This situation can be addressed, and the first safeguard is a proactive one. When you are originally establishing your estate plan, along with your living trust, you can include a pour-over will. This type of will would allow the trust to absorb assets that were in your personal possession at the time of your passing.
In addition to the pour-over will, in California where we practice law, an attorney could file a Heggstad Petition if it is necessary. A schedule of assets that you wanted in the trust would be presented to the court, even if they were never formally transferred over to the trust.
If the court determines that the property should be in the trust, a judgment would be handed down that would make the trust the owner of the property.
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