You should gain an understanding of the estate administration process when you are devising your estate plan. There are certain tasks that must be completed to bring your final wishes to fruition, so there is a human element that is an important part of the equation.
If you are like most people, you want your heirs to receive their inheritances in a timely manner after you are gone. Though a last will can seem like the simplest and most efficient asset transfer device to utilize, there is a time lag that will enter the picture if you use a will as your vehicle of asset transfer.
After you die, the executor that you name in the document would be required to admit the will to probate. Probate is the legal process of estate administration.
This process exists to serve a purpose, and the state of California does everything possible to do things in an efficient manner. At the same time, the process is inherently time-consuming. Complicated cases can take longer, but a relatively straightforward case will be stalled in probate for around nine months to a year.
The heirs do not receive anything while the estate is being probated, so this delay can be an inconvenience at best, and at worst, it can cause genuine hardships.
Revocable Living Trusts
People sometimes shy away from trusts because they are under the impression that you surrender control of assets that you convey into any type of trust. They are concerned that they may need resources that they would like to pass along to their loved ones in a perfect world.
You do not surrender control of assets that you convey into a revocable living trust, and you do not have to be extremely wealthy to realize the benefits. With this type of trust, you can act as the trustee while you are living, so you direct the actions of the trust. There is no loss of control on this level.
Once you create the trust, you can make changes along the way, and you can add or subtract property at any time.
In the trust declaration, you name a successor trustee to handle the business of the estate after you are gone. Many people use a corporate trustee like a trust company, but you could name someone that you know personally to act as the successor trustee if you choose to do so.
You name beneficiaries who will receive monetary distributions from the trust after your passing. One benefit that you gain from the creation of a living trust would be the ability to include spendthrift protections. If you have concerns about the money management abilities of the beneficiaries, you could instruct the trustee to distribute limited assets over an extended period of time. Many people will have the trustee invest the assets and distribute the earnings to the beneficiaries incrementally on a monthly basis.
After you are gone, the trustee would be able to distribute assets to the beneficiaries in accordance with your wishes outside of probate. As a result, if there is adequate liquidity, the beneficiaries could start to receive distributions shortly after your passing.
The avoidance of probate is just one benefit that you gain if you use a revocable living trust as your primary estate planning tool. Assets contained in a living trust would not be protected from your creditors while you are alive, because of the fact that you have the power to revoke the trust. Things are different after you pass away. The trust would become irrevocable, so there would be asset protection for the beneficiaries after your passing. Creditors would not be able to attach the principal as long as it remains in the trust.
Another living trust benefit would be the ability to prepare for latter life incapacity. A significant percentage of elders become unable to handle their own financial affairs at some point in time. When you establish a living trust, you can empower the successor trustee to administer the trust in the event of your incapacitation.
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