There are different types of asset transfer vehicles that you can use when you are planning your estate. You can choose to use a simple will to state your final wishes, but you do have other options.
Why would you want to consider an alternative to a simple will? Let’s begin by answering this question.
The Drawbacks of Probate
Let’s say that you maintain personal possession of your property throughout your life. You create a last will expressing your final wishes with regard to the distribution of these monetary resources.
When you create a will you should include the nomination of an executor. This is the person who is going to administer the estate after your passing.
The executor does not immediately start distributing inheritances after the death certificate has been issued. The will must be admitted to probate. During probate the court must determine its validity and supervise the administration of the estate.
We would like to emphasize the fact that the state of California does everything possible to provide an efficient and effective probate process. This being stated, there are inherent drawbacks that simply cannot be avoided.
Probate is going to take a certain amount of time to run its course. At minimum it will take months, and complicated cases can take years. There are costs that accumulate during probate as well. Lastly, probate records are available to the general public, so there is a loss of privacy.
It is possible to arrange for the transfer of assets outside of the process of probate.
Revocable Living Trusts & Probate Avoidance
If you were to create and fund a revocable living trust, you could facilitate the transfer of your assets to your heirs outside of probate.
You as the person creating the trust are referred to as the grantor. The anatomy of a trust will include a trustee who administers the trust, and a beneficiary or beneficiaries who will receive monetary distributions out of the trust after you die.
You may be reluctant to create a trust because you are concerned about losing control of the assets while you are living. In fact, you cannot lose control of the resources when you fund a revocable living trust.
Think about the name: the trust is revocable. If you want to, or if you have to for some reason, you can revoke or rescind the trust at any time and it would no longer exist. The assets that you conveyed into the trust would once again become your direct personal property.
Of course you are creating the trust for a reason, so it is very likely that you will not want to revoke it. However, even while the trust is intact, you retain control of the assets.
You can act as both the trustee and the beneficiary while you are still alive and well. Successors that you name when you create the trust agreement assume these roles after you pass away. After you are gone, the successor trustee would distribute assets that remain in the trust to the beneficiaries. These distributions would not be subject to probate.
Plus, you can include spendthrift protections, and you could instruct the trustee to distribute assets to the beneficiaries little by little so that they do not burn through their inheritances too quickly.
There is another advantage that you would gain with a revocable living trust. When you are planning your estate, you should consider the possibility of incapacity late in your life. A significant percentage of seniors become unable to handle their financial affairs eventually.
When you create a revocable living trust, you can name a disability trustee. This individual or entity would be empowered to administer the trust if you were to become incapacitated. The disability trustee would be guided by the instructions that you set forth in the trust agreement.
Incapacity is quite common among people who have reached an advanced age, so this is something to take seriously. One out of every eight senior citizens has Alzheimer’s disease, and over 40 percent of those who are 85 years of age and up have contracted Alzheimer’s.
Alzheimer’s is not the only cause of incapacity. When you combine all of the possible causes of incapacity with Alzheimer’s disease, you can see why incapacity planning is a must.
Attend a Free Estate Planning Workshop
If you are interested in the possibility of working with our firm after learning these facts, please select our “Workshops” tab to RSVP for a free estate planning workshop. At that workshop you will be offered a free one-hour consultation with an attorney: https://collinslawgroup.comseminars/