Studies that are conducted consistently show that most people do not give estate planning a second thought until they are senior citizens. Because so many procrastinate for so long, they wind up making uninformed choices when they finally do take action. They put together a last will on their own using some type of do-it-yourself download, and they hope for the best.
The psychology behind this is understandable, but it is something to be transcended. Yes, you will not be around to see the results when you do not plan your estate effectively, but your family members will be heavily impacted. When you start to recognize how important your legacy will be to the people that you love, you may start to take the matter much more seriously.
Last Wills: Limitations and Drawbacks
Unless you have extremely limited resources and very basic estate planning objectives, you may want to think twice before you use a last will as your primary asset transfer vehicle. One major limitation that goes along with the creation of a simple will is the fact that you would be facilitating lump sum asset transfers. For a number of different reasons, this may not be the best way to provide for everyone on your inheritance list.
Many people are not aware of the fact that the executor that is named in the last will cannot act independently without supervision. The executor or personal representative would be required to admit the will to probate if the value of the estate exceeds $30,000. If it does not, a simplified probate procedure would be available.
This is the legal process of estate administration, and here in New York where we practice law, the Surrogate’s Court is in charge of probate matters. During probate, creditors are given time to come forward, and this is a completely fair safeguard. However, it does slow down the process.
Depending on the nature of the estate, there can be many other tasks that must be completed by the executor before the estate can be closed by the court. Final taxes must be paid along with the other debts, and there can be appraisal and liquidation chores the must be completed as well.
This adds to the time consumption, and even if everything goes smoothly and the estate is not especially complicated, it will take at least nine months to a year for the process to run its course.
Plus, in addition to the liquidation and appraisal expenses, there will be a filing fee, the executor’s payment, court costs, and other incidental expenses. All of this red ink reduces the amount of the inheritances that will eventually be received by the heirs to the estate.
A revocable living trust is a much more flexible and comprehensive estate planning tool, but there are those that think that they lose control of assets in a trust. They reason that they may need the money unexpectedly, so they don’t consider this option.
If you look at the name of this particular type of trust, you can see that it is revocable, so if you ever choose to do so, you can dissolve the trust entirely.
There is no loss of control on that level, and you can act as the trustee and the beneficiary while the trust is intact. In the trust declaration, you name successors to assume these roles after you pass away. One of the first benefits that you can take advantage of when you establish a living trust is the incapacity planning component.
You can empower the successor trustee to act as a disability trustee if you become unable to handle your affairs at some point in time. It should be noted that you do not have to use the same person to act as your disability trustee and successor trustee.
Getting back to the notion of lump sum inheritances, you are not required to go this route if you create a revocable living trust. You can instruct the trustee to distribute assets to the beneficiary or beneficiaries incrementally over an extended period of time.
Assets in a living trust can be distributed outside of the costly and time-consuming process of probate. This is yet another benefit that comes along with the creation of a living trust.
Attend an Upcoming Workshop!
We are holding a series of workshops in the near future, and we urge you to attend the session that fits into your schedule. They are being offered on a complimentary basis, you can click the following link to get all the details: Rochester Area Estate Planning Workshops.
- Estate Planning Conference Discusses “For the 99.5% Act,” SECURE, and More - June 23, 2021
- Inconvenient Truths Make Incapacity Planning a Must - June 22, 2021
- Trust Administration: Where Do You Begin? - June 10, 2021