You may want to consider the use of a revocable living trust to serve as a vehicle of asset transfer instead of a last will. Let’s look at some of the reasons why this may be a better choice.
Trust vs. Will
When you state your wishes regarding the transfer of personally owned property through the terms of a last will, the heirs to the estate don’t receive their inheritances right away. The will must be admitted to probate first. The estate must be probated before the inheritances will be distributed.
The process of probate is avoided for a few different reasons. Perhaps the best reason to avoid probate would be to facilitate a fast and efficient transfer of assets after you die. Probate can be time-consuming, taking anywhere from a number of months to multiple years to run its course depending on the circumstances.
There are also significant costs that accumulate during the probate process.
If privacy is a concern, you should understand the fact that probate records are available to anyone who is interested in knowing what went on during the process.
If you use a revocable living trust rather than a last will to arrange for the transfer of your property, probate will not be a factor. The trustee will distribute monetary resources to the beneficiaries outside of probate, and these pitfalls will be avoided.
If you choose to use a revocable living trust because you want to avoid probate, you should still execute a will that is called a pour-over will. The name of this device hints at its purpose.
Let’s say that you create a revocable living trust on this day, and you convey property into it. You may not place everything that you own into the trust right away.
Over the years you may accumulate additional property that you never convey into the trust. You may do this quite intentionally, and on the other hand you may simply never get around to it.
The point is that you will probably be in personal possession of some property that has not been conveyed into your revocable living trust when you die. You can account for this by executing a pour-over will that allows the trust to capture these personally held assets at the time of your death.
If you don’t include the pour-over will, the assets that have not been conveyed into the trust would be looked upon as probate property. The probate court would be involved, and this property would not be distributed to the heirs until the estate was probated and closed.
This is a brief look at living trusts and pour-over wills. To learn more, contact our firm to schedule a free consultation.
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.