People need an estate plan if they want to ensure that their intentions will be honored after death with respect to the distribution of their assets. If you have an estate plan in place, does it also include a trust (sometimes called a living trust or a revocable trust)? If your current estate plan only consists of a last will and testament, you may want to consider also creating a trust.
When you set up a trust, most of your assets are transferred from your name to the name of your trust with you as trustee. You then appoint a person or corporation to manage those assets on your behalf upon your incapacity or death – i.e. successor trustee.
Here are just a few of the benefits of a trust:
Avoids Probate. Probate is the legal process that occurs when you die. Your assets are distributed according to your will, and if you don’t have a valid will, your assets are distributed according to state law. This takes time and can be expensive. A last will and testament alone will not avoid probate but can make the process easier.
Reduces Tax Liabilities. A trust allows for tax planning to ensure that you utilize federal estate and gift tax exemptions to the greatest extent possible.
Prevents Guardianship. A trust prevents the need for a court administered guardianship upon incapacity.
Not Easily Contested. A trust can be much more difficult and expensive to contest than a will.
Private. Probate is a public process where your assets and beneficiaries can be on display. A trust is not filed with the court and generally remains private after your death.
Quicker Administration. Distributions to beneficiaries occurs much quicker than in the probate process. Often, trust assets can be distributed in weeks or months, whereas a probate administration may take months or years. Further, if you own property in multiple states, probate can be cumbersome.
Disability Planning. A trust can provide provisions that protect a disabled beneficiary that is receiving government benefits so that the government benefits are not “shut off” upon the beneficiary receiving an inheritance.
Additional Control. Assets transferred to a trust can then be governed by the trust document long after you die. This allows to you control your assets so they are distributed to the beneficiaries in a manner that you determine. For example, you could have the trust distribute assets to your children slowly over a span of many years, whereas your last will and testament will often distribute your assets outright to your children in one lump sum for them to spend how they choose.
Peace of Mind. Most of all, a trust provides peace of mind. A trust plan allows you to take care of your loved ones when you are no longer around or lack the capacity to assist them.
If you are interested in creating an estate plan for the first time, or adding a trust to your existing estate plan, please contact our office for more information.