The most important decision you will make when you are planning your estate is the legal device that will serve as the centerpiece. Many people automatically assume that they should use a will because they have misconceptions about trusts.
One of them is the idea that trusts are not useful unless you are a multimillionaire. This is patently false, because there are different types of trusts that satisfy very different respective objectives.
Aside from a simple will, the most commonly used estate planning document is the living trust, and we will highlight the differences here to debunk the trust myth.
Lengthy Estate Administration and Limited Options
If you state your final wishes in a will, it would be admitted to probate. This is a legal process that takes place under the supervision of a court.
In the document, you would name an executor to act as the estate administrator, and this individual would complete the hands-on administration tasks. The assets would be identified and prepared for distribution, and final debts would be paid during probate.
This is a time-consuming process that will take about eight months at minimum in most areas, and it can take considerably longer under some circumstances. No inheritances are distributed until the court has closed the estate, so the inheritors have to wait it out.
Probate is a public proceeding, so anyone that wants to find out how the assets were distributed can access the records. Expenses accumulate while the estate is being probated, and this is another negative.
Eventually, the assets will be distributed to the heirs, and they would receive lump sum inheritances all at once. There would be no asset protection or controls going forward, so a person that is not good with money could burn through their inheritance far too quickly.
Revocable Living Trust
Aside from the idea that trusts are only used by very wealthy people, another myth is the notion that you lose control of assets that you convey into a trust. When you establish a revocable living trust, you could in fact revoke the trust and take back direct personal possession of the property.
This is not the only way that you retain control. While you are alive and well, you would act as the trustee, so you would have absolute control of the assets in the trust in every way.
In the trust declaration, you would name a successor to assume the role after you are gone. You can use someone that you know personally, or you can engage a professional such as a trust company or the trust section of a bank.
You can determine how you want the assets to be distributed to the beneficiaries. For example, you can instruct the trustee to distribute a certain amount each month until the beneficiaries reach certain age thresholds. This is just one possibility, but the distributions schedule is up to you.
When it comes to the estate administration process, living trust distributions are not subject to probate, so the hassles that we described in the last section are avoided.
Since all the assets that comprise the estate would be titled to the trust, the process is streamlined for the trustee, and this works in the beneficiaries’ favor.
Another positive is the ability to account for possible incapacity. Alzheimer’s disease is common among elders, and it is not the only cause of cognitive impairment. You can name a disability trustee to fill the role if it ever becomes necessary when you establish the trust.
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The revocable living trust is a very effective estate planning tool that is the ideal choice for a wide range of people. This being stated, there are many tools in the estate planning toolkit, and there are other types of trusts that satisfy certain targeted objectives.
In addition to the asset transfer part of the equation, you should also address life care planning issues, like long-term care costs and possible incapacity.
When you choose our firm, we will gain an understanding of your situation and your objectives, and we will provide recommendations so you can make fully informed decisions. At the end of the process, you will go forward with a custom crafted plan that is ideal for you and your family.
If you are ready to get started, you can schedule a consultation at our Memphis, TN estate planning office if you call us at 901-763-2500 or 866-997-6325. There is also a contact form on this site you can use if you would rather send us a message.