You may not give estate planning a lot of thought. When you do, the document called a last will may come to mind. When you get ready to take action, you can just draw up a last will, and you will be good to go.
In reality, this is an oversimplification. In many instances, a trust would be a better choice. Let’s look at some of the reasons why you may want to use a trust instead of a will.
Efficient Asset Transfers
When a will is used, it must be admitted to probate. The court supervises the administration of the estate under these circumstances, and this is not always going to benefit the rightful inheritors.
There are probate expenses that reduce the value of the estate, and there is also the time factor. The heirs do not receive inheritances while the estate is being probated, and it will usually take somewhere in the vicinity of a year if there are no complications.
Plus, if you leave lump sum inheritances through the terms of a will, what if you have family members who spend their money too quickly?
You could avoid these pitfalls if you use a revocable living trust instead of a will. With this type of trust, there would be no probate court involvement, so assets could be distributed quickly.
Plus, you could leave behind specific instructions regarding the way that you want the assets distributed. The trustee that you name could be instructed to distribute limited assets on an incremental basis over an extended period of time.
High net worth individuals must be concerned about the estate tax. It is potentially applicable on asset transfers that exceed $5.43 million in value.
If you maintain personal possession of your property and pass it along through the terms of a will, there would be no estate tax efficiency. There are trusts that can be used to ease the burden.
Medi-Cal will pay for long-term care, but Medicare will not help with these expenses. Most people will need long-term care eventually, so this is a big deal, because nursing homes are very expensive.
You can’t qualify for Medicaid if you have significant assets in your own name. To qualify, you could potentially convey assets into a Medicaid trust.
Assets that are in your personal possession could be subject to attachment if you are sued. There are trusts that can provide asset protection during your life, and there are also trusts that can protect assets that you are passing along to your loved ones.
Learn More About Trusts
We have just scratched the surface in this blog post. If you would like to discuss your options with a licensed professional, send us a message through this page to set up a free consultation: Indianapolis IN Estate Planning Attorneys.
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.