Many people think that a last will is the only logical choice as an estate planning vehicle of asset transfer if you are not extremely wealthy. In reality, this is not the case at all. A last will could be the right choice for someone with a straightforward family dynamic and very little to pass along. However, most people that have enjoyed even a moderate level of success would be better served through the utilization of a revocable living trust.
Last Will Problems and Limitations
There are some things about a last will that are troublesome, and there are also severe limitations. One of the problems is the existence of the probate process.
If you were to use a last will, you would name an executor to handle the estate administration tasks. This administrator would not be allowed to simply follow your instructions and distribute assets directly to the inheritors. It would be admitted to probate, and the administration of the estate would be supervised by the Surrogate’s Court here in New York.
During this interim, creditors would have the opportunity to come forward seeking satisfaction. This is fair enough, and it also opens a window of opportunity for anyone that may want to challenge the validity of the will. These are worthwhile protections, but unfortunately, the process is not necessarily positive for people that are in line for rightful inheritances.
One of the things about probate that is not going to be welcomed by the family of the deceased individual is the duration of the process. It will typically take eight or nine months to a year for the probate process to run its course if the estate is not overly complicated. When there are complexities, it can take considerably longer.
For example, the Anna Nicole Smith versus the Marshall family case was stalled in probate for many years.
In addition to the time consumption, another problem with probate is the money that is spent. There is a filing fee, the executor is entitled to remuneration, a probate attorney may be brought in, and there are appraisal and liquidation expenses. All of these debits can significantly reduce the amount of the inheritances that will be received by the heirs.
Another thing about a last will that may not be to your liking is the fact that you would be giving bequests in lump sums. If you have someone in the family that is not good at handling money, this can be a source of concern. This individual could burn through his or her inheritance too quickly and have nowhere to turn when future financial problems arise.
The Benefits of a Revocable Living Trust
One thing to understand about a revocable living trust right off the bat is the fact that you don’t have to worry about losing control of assets that you convey into it. As the name plainly states, you can revoke the trust entirely if you ever choose to do so.
You can also act as the trustee and the beneficiary while you are living, so you are at the helm every step of the way. After you establish and fund the trust, you can sign property over to it at any time, and you can take property out of it.
The purpose of the trust is to serve as an estate planning tool, so you name a trustee to administer the trust after you are gone, and you name your heirs as beneficiaries. When it comes to the choice of a trustee, you can name someone that you know personally, but a professional fiduciary like a bank or a trust company may be a better choice.
All of the probate pitfalls that we have touched upon would be avoided, because the trustee would be empowered to transfer assets to the beneficiaries outside of probate. When it comes to a spendthrift heir, you would have the ability to instruct the trustee to distribute limited assets over an extended period of time. Lump sum distributions would not be required.
You can account for incapacity when you establish a revocable living trust. In the trust declaration, you can name a person or entity to act as a disability trustee if you ever become unable to handle your own financial affairs. It is also very useful to have your assets consolidated in the trust so that the estate administrator does not have to spend a lot of time and effort identifying the resources that comprise the estate.
Download Our Free Estate Planning Worksheet!
If you would like to learn more about estate planning, download our worksheet. It is being offered free of charge at the present time, you can visit this page to access your copy.
Latest posts by Michael Robinson, Estate Planning Attorney (see all)
- One Will May Not Be Enough - March 21, 2019
- A Special Needs Trust Can Preserve Medicaid Eligibility - March 19, 2019
- Estate Tax Exclusions Adjusted for 2019 - March 14, 2019