What are these drawbacks? For one, a will must be admitted to probate. This is a legal process, and the heirs to the estate do not receive their inheritances while the estate is being probated by the court.
Depending on the circumstances, this can be a long wait. Some cases take longer, but a best case scenario would be somewhere close to a year in most areas. Plus, probate expenses typically enter the picture, and these expenditures reduce the value of the estate before it is distributed among the heirs.
If a will is used as an asset transfer vehicle, the people that are named in the will would receive their inheritances all at once after the estate was probated. Some people are not effective money managers, so you may not want to allow for lump sum distributions to everyone on your inheritance list.
These drawbacks are avoided if you use a living trust instead of a last will as your primary asset transfer vehicle. While you are living, you can act as the trustee, so you would handle the business of the trust.
In the trust declaration, you name a trustee to succeed you after you are gone. This can be someone that you know personally, but many people use a corporate trustee like a bank or a trust company.
The trustee would be able to distribute assets to the beneficiaries outside of probate, and this is a major positive. Plus, you could instruct the trustee to distribute assets on a limited basis over an extended period of time to prolong the viability of the trust.
Many people become unable to make sound decisions at some point in time, with Alzheimer’s disease being one of the leading causes. The oldest segment of the population is growing faster than any other, and somewhere in the vicinity of 45 percent of people who are at least 85 have contracted Alzheimer’s, so this is relevant to all of us.
To account for possible incapacity, you could empower the successor trustee to handle the trust administration tasks if you were to become unable to handle your own financial decision making at some point in time.
You are probably aware of the fact that a power of attorney is a document that you can use to name an agent or attorney-in-fact to act on your behalf in a legally binding manner. A durable power of attorney is a type of POA that would remain in effect, even if the person who granted the power was to become incapacitated.
If you were to use a last will instead of a revocable living trust, you could name someone to handle your finances for you through the execution of a durable power of attorney. However, a durable power of attorney can also be utilized in conjunction with a living trust, even if you empower a successor or disability trustee to administer the trust if you become incapacitated.
You could create a durable power of attorney that would give your successor trustee the limited ability to manage assets that you never conveyed into the trust in the event of your incapacitation. This is one significant benefit, and the successor trustee would also be able to sign your tax returns on your behalf. You cannot legally use a living trust document to give the trustee this power, so this is another good reason why a power of attorney can be used along with a revocable living trust.
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As you can see, a living trust can be a very useful estate planning document on a number of different levels. You facilitate efficient asset transfers when you use a living trust, and you can include spendthrift protections. There can also be a certain degree of asset protection if you include a spendthrift provision.
If you would like to obtain more detailed information about the value of a revocable living trusts, we have an excellent resource that you can access quickly and easily through this website.
Our firm has prepared numerous different special reports, and one of the reports will tell you everything that you need to know about living trusts. This report is being offered free of charge right now, and you can click the following link to access your copy: Free Report on Revocable Living Trusts.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.