While there are other estate planning tools (such as joint tenancy, transfer on death, and beneficiary designations), only a living trust provides comprehensive management of your property in the event you can’t make financial decisions for yourself (also known as legal incapacity) or after your death.
One of the primary advantages of having a living trust is that it provides the ability to bypass the publicity, time, and expense of probate. Probate is the legal process by which a court determines if a will is valid, if there is no will, determines the rightful heirs and oversees payment of expenses and distribution of assets of the decedent through the administration of the estate. The probate process can easily cost thousands of dollars and take a year or more to resolve.
Of course, not all assets are subject to probate. Some exceptions include jointly-owned assets with rights of survivorship, as well as assets with designated beneficiaries (such as life insurance, annuities, and retirement accounts) and payable upon death or transfer on death accounts. But joint tenancy and designating beneficiaries don’t provide the ability for someone you trust to manage your property if you’re unable to do so; so they represent an incomplete solution set. And having a will does NOT avoid probate.
In general, if your “probate” assets are worth $100,000 or more, you should strongly consider creating a trust. Considering the cost of probate should also be a factor in your estate planning as creating a trust can save you both time and money in the long run. Moreover, if you own property in another state or country, the probate process will be even more complicated because your family may face multiple probate cases after your death, one in each state where you owned property – even if you have a will.
Beyond the cost and time of probate, this court proceeding that includes your financial life and last wishes is public record. A trust, on the other hand, creates privacy for your personal matters, as your heirs would not be made aware of the distribution of your assets, knowledge of which may cause conflicts or even legal challenges.
Besides the probate avoidance and management benefits of living trusts, another common reason to create a trust is to provide ongoing financial support for a child or another loved one who may not ever be able to manage these assets on their own. Through a trust, you can designate someone to manage the assets and distribute them to the beneficiaries you choose under the terms you provide. Giving an inheritance to an heir directly—and all at once—may have unanticipated ancillary effects, such as disqualifying them from receiving some form of government benefits, enabling and funding an addiction, or encouraging irresponsible behavior that you don’t find desirable. A trust can also come with conditions that must be met for the person to receive the benefit of the gift. Furthermore, if you ever become incapacitated your successor trustee (the person you name in the document to take over after you pass away) can step in and manage the trust’s assets, helping you avoid a guardianship or conservatorship (sometimes referred to as “living” probate). This protection can be essential in an emergency or in the event you succumb to a serious, chronic illness. Unlike a will, a trust can protect against court interference or control while you are alive and after your death.
Trusts are not simply just about avoiding probate. Creating a living trust can give you privacy, provide ongoing financial support for loved ones, and protect you and your property if you are unable to manage your own assets. Simply put, the creation of a trust puts you in the driver’s seat when it comes to your assets and your wishes as opposed to leaving this critical life decision to others, like a judge.
At the Forrest Firm, we routinely advise clients on the advantages, benefits, and suitability of wills, trusts, and other estate planning vehicles to protect your assets and your wishes for your family. Contact me at the firm today to get started on a plan that will achieve your goals.