A living trust is a very effective estate planning device that is the right choice for a wide range of people. Before we answer the specific question that is the focus of this post, we will provide a brief overview of the benefits.
Control and Flexibility
Some people never consider the possibility of using a trust because they think that you are surrendering control of the assets that you transfer into any trust. You would surrender control of an irrevocable trust, but you retain incidents of ownership when you create a revocable living trust.
Aside from the ability to revoke or rescind the trust, you would act as the trustee, and you could change the beneficiary or trustee designations. You would also be able to convey property into the trust after it has been created. Simply put, your ability to freely utilize your property would not change at all.
A major benefit is the avoidance of probate. This is a legal process that would enter the picture if you use a will instead of a living trust as the primary asset transfer device. Probate is time-consuming, it is a public proceeding, and it can be expensive.
You can include protections to account for the spendthrift tendencies of a beneficiary when you have a living trust, and you create a streamlined estate administration situation.
Another advantage is the incapacity planning provision. You can name a disability trustee to administer the trust if you become unable to handle your own financial affairs at some point in time.
Personally Held Assets
Though you can make the trust the owner of property that you acquire after it has been established, you may fail to do so for one reason or another. To account for this, you should include a pour-over will when you execute the living trust.
This will would essentially make the trust the beneficiary of any assets that are in your personal possession at the time of your passing. That’s the good news, but the bad news is that the transfer could be subject to the probate process.
Aside from the pour-over will, you have recourse if you pass away with personally held assets that you intended to convey into the trust. A Heggstad petition can be filed with the court, and if the court is convinced that you wanted the trust to hold these assets, they would be transferred to the trust.
The pour-over will would help your attorney make the case that you did in fact want the trust to hold all of the estate’s assets.
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Cesar has received his Masters of Science in Integrated Design, Business and Technology from the University of Southern California.
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