A lot of people harbor misconceptions about last wills and trusts. They think a will is the only logical choice if you are not extremely wealthy. In reality, this is nothing more or less than a widely embraced myth.
Like a lot of misguided notions, there is a kernel of truth in it. High net worth individuals that are exposed to estate taxes do in fact use trusts to gain tax efficiency.
However, a revocable living trust is a great choice for a wide range of people, and you don’t have to be very wealthy to enjoy the benefits. In this post, we will look at four compelling reasons why you may want to use a living trust as the centerpiece of your estate plan.
If you use a last will to state your final wishes with regard to the distribution of your assets after your passing, you would name an executor in the document. This is the person or entity that would act as the estate administrator.
The executor would not be empowered to distribute the assets to the heirs immediately. Under the laws of the state of New York, the will would be admitted to probate, and the Surrogate’s Court would provide supervision during the administration process.
Probate serves a purpose, but in most cases, it does not benefit the inheritors. One of the major drawbacks is the time consumption. Even if there are no particular complications, it will take about nine months to year, and no inheritances typically are distributed during this interim.
Another negative is the cost factor. There is a filing fee, and there can be legal and accounting charges. The executor is entitled to remuneration, and there will often be appraisal and liquidation expenses. All in all, a noticeable portion of the estate can be consumed during probate.
This is a public proceeding, so the records are available to anyone that has an interest. Most people value their privacy, and the information can potentially cause hard feelings among interested parties.
If you use a living trust instead of a last will, the trustee would be empowered to distribute the assets in accordance with your wishes outside of probate. As a result, all of these pitfalls would be avoided.
It is definitely not a very pleasant prospect to consider, but the cold hard truth is that a significant percentage of elders become unable to make sound decisions at some point in time. Alzheimer’s disease strikes about one third of individuals that are 85 years of age and older, and it is not the only cause of incapacity.
When you have a living trust, you can serve as the trustee while you are alive and well. To account for possible incapacity, you can name a disability trustee to assume the role if you become unable to handle it yourself.
You can protect someone on your inheritance list that is not good with money when you have a living trust. Through the inclusion of a spendthrift provision, the principal would be protected from the beneficiary’s creditors. It is also possible to instruct the trustee to distribute limited assets and the beneficiary over an extended period of time.
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