You have a number of different options available to you when you are planning your estate with regard to vehicles of asset transfer. To be optimally prepared, you should make no assumptions and educate yourself so that you can make informed decisions.
Everyone has heard of the last will or last will and testament. This is the most commonly utilized estate planning document. You may think that you should use a last will because you are not particularly wealthy. Many people assume that trusts are only for very high net worth individuals.
In fact, this is not necessarily the case. If you discuss things with a living trust attorney, you will find that there is a type of trust that can be extremely useful for people who are not among the financial elite.
Revocable Living Trusts
When you create and fund a revocable living trust, you are not surrendering control of the assets right away. This is part of the appeal of these trusts.
The anatomy of a revocable living trust trust would involve a grantor, a beneficiary (or beneficiaries), and a trustee. The grantor is the individual who is creating the trust. The beneficiary will receive monetary distributions out of the trust. The trustee is the individual or entity who administers the trust.
If you are the grantor of a revocable living trust, you can act as both the trustee and the beneficiary while you are alive and fully capable of making sound decisions. Because of this arrangement, you control investments, and you can take distributions out of the trust.
This is a revocable trust. Therefore, you as the grantor may revoke or rescind the trust at any time, and it would no longer exist. The assets that you have conveyed into the trust would once again become your direct personal property.
You can also change the terms of the trust and add or subtract beneficiaries as you see fit.
The ultimate point of the creation of a revocable living trust is to facilitate the transfer of your monetary assets to your heirs after you pass away. Though you may act as the trustee and the beneficiary at first, you name successors to assume these roles after you die.
After your passing, the trustee that you name in the trust agreement will follow the terms of the agreement to make distributions to the beneficiaries in accordance with your wishes.
Last Wills and Probate
If you were to use a last will rather than a revocable living trust to arrange for the transfer of your assets, a different dynamic would exist. Under these circumstances, the executor would be forced to admit the will to probate. The heirs to the estate would not receive their inheritances until after the estate was probated and closed by the court.
This can be a time-consuming process. Simple cases will typically take around a year in most jurisdictions, and more complex cases can take much longer.
There are also costs that can accumulate during the process of probate. These expenses will reduce the value of the estate before it is passed on to the heirs.
The events that take place during the probate process become a matter of public record. Anyone who is interested could find out how you arranged for your assets to be distributed. If there were any disputes, these disputes would become a matter of public record as well. This loss of privacy is another one of the drawbacks.
All of these pitfalls are avoided when you utilize a revocable living trust rather than a last will to state your final wishes regarding the transfer of your financial resources. Distributions of assets that are contained within a living trust would not be subject to the probate process.
Aside from the avoidance of probate, another benefit that you realize when you utilize a revocable living trust is the ability to plan ahead for the possibility of incapacity late in your life. A significant percentage of elders do become incapacitated, with Alzheimer’s disease being the leading cause.
If you do not take action in advance, a guardian could be appointed by the state to handle your financial affairs in the event of your incapacitation. You can prevent this by creating a revocable living trust. The disability or successor trustee that you name in the trust agreement would be empowered to administer the trust should you become incapacitated at some point in time.
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