If you take the time to discuss your estate planning options with an attorney from our firm, you will understand why you may want to utilize a revocable living trust instead of a last will. When a will is used, it must be admitted to probate. This is a time-consuming and costly process, and there are limitations that go along with the utilization of a will.
Things are very different with a revocable living trust. As the name suggests, you don’t have to worry about surrendering control of assets that you convey into the trust, because you have the power of revocation. When you establish a living trust, you can act as the trustee, which is the administrator, while you are alive. You can also be the beneficiary, which is the party that can receive monetary distributions from the trust.
Along the way, you have the power to convey additional resources into the trust, and you can remove assets as you see fit. We should point out the fact that if you are married, you and your spouse could share the roles of trustee and beneficiary. This being stated, for the purposes of simplicity, our explanation will be confined to a trust that is established by a single person.
In the trust declaration, you name a trustee to administer the trust after you are gone, and you name successor beneficiaries. We are going to provide some food for thought with regard to the choice of the trustee, but before we do so, we should explain some of the benefits that you gain when you use a living trust.
One of the major advantages is the fact that assets that are held by the trust can be distributed by the trustee to the beneficiaries outside of probate. As a result, the heirs can receive their inheritances in a more timely manner, and all the expenses that go along with probate would be avoided.
Plus, if a disgruntled party was to challenge the terms of the trust, it is a very difficult hill to climb. It would require the initiation of legal action, and you could include a clause in the trust that would allow for the disinheritance of anyone that tries to present a challenge. On the other hand, any interested party could easily step forward to challenge the validity of a last will during probate.
The consolidation of the assets is another major advantage. Your trustee would be able to immediately gain an understanding of all the resources that must be distributed. You could include a pour over will in your estate plan that would allow the trust to absorb the assets that were in your direct personal possession at the time of your death.
With a living trust, you have the ability to include spendthrift protections. For example, let’s say that you have a daughter that has never been able to handle money well. She has come to you on many different occasions seeking financial assistance.
You have concerns about the possibility of her burning through her inheritance too quickly and having nowhere to turn later on. We will assume that you own an apartment building that you are willing to leave to your daughter. After expenses, the rent payments generate $5000 of income per month. Under these circumstances, you could instruct the trustee to distribute this $5000 to your daughter on a monthly basis.
Now that we have provided a suitable explanation with regard to the value of a living trust, we can get to the subject that serves as the title of this blog post. When you think about naming a trustee, your first thought may be to empower someone that you know personally. You are certainly allowed to go that route, but there are some things to think about before you make a final decision.
The anticipated lifespan of the trustee would be something to take into consideration. Yes, you can name a series of successors, but that is rather complicated. There is also the matter of real or perceived favoritism or conflicts of interest. This can be a very relevant factor if you have multiple beneficiaries receiving distributions from the same trust.
There are certain legal steps that must be taken immediately after your passing, and someone that you know that is a good money manager may not understand how to proceed. Trust administration can require a lot of attention, so the time factor can enter the picture as well.
To avoid all of these potential problems, you could utilize a professional fiduciary. Trust companies and the trust sections of banks are more than willing to act as trust administrators. When you have a professional at the helm, you can go forward with the knowledge that your trust will be competently administered after your passing.
Download Our Free Estate Planning Worksheet!
Our firm has prepared a very informative estate planning worksheet, and it is being offered free of charge at the present time. We urge you to obtain your copy right now, and you can do just that if you click this link and follow the simple instructions.
Latest posts by Michael Robinson, Estate Planning Attorney (see all)
- Is a Family Limited Partnership Right for My Business? - August 22, 2019
- Your Planning Can Help Your Loved Ones - August 21, 2019
- How Large of an Estate Can Pass Tax Free? - August 20, 2019