When the layperson hears the term “estate planning” the thing that usually comes to mind is the last will, and this is of course one way to pass along your assets to your loved ones after you die. However, many people prefer to use a trust such as a revocable living trust once they pay a visit to an estate planning attorney and hear about all the options that are available to them.
For the majority of individuals the primary reason why a trust may be preferable to a last will is because the transfer of assets facilitated by the trust does not have to pass through the process of probate. Probate is the period during which the validity of your will is determined by the probate court, and anyone who wanted to contest the will could do so during this interim. The possibility of will challenges in and of itself is one of the reasons why people choose to avoid probate.
In addition to this, probate is time-consuming and it can be expensive. Your heirs will not receive their inheritances until the estate has been probated and closed, and this can take anywhere from several months to multiple years depending on the complexity of the case. Expenses involved with the probate process can consume anywhere from perhaps 2% to in excess of 5% of the total value of your estate.
These are the reasons why you might want to avoid probate via the creation of a trust. But if you do, you would also want to include a pour-over will. You may acquire property after you have created the trust, and for logistic reasons you may choose not to place certain property into the trust while you’re still alive. The pour-over will directs any assets that you have remaining into the trust after you pass away so that none of your personal property is subject to distribution via the law of descent.
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.