The most commonly utilized estate planning device other than a last will is the revocable living trust. If you have always assumed that you will be using a will, you should understand the benefits that living trusts provide so you can make an informed decision.
Consolidation of Assets
When a will is used, the executor is the estate administrator. Imagine the situation that the executor will step into after the passing of the testator.
Everything that the deceased party owned will be part of the estate, but the ownership documents and the physical property may be scattered about. The executor will have to identify all the assets and inventory them and track down all relevant documents.
On the other hand, when a living trust is used as an estate planning vehicle, the trust will be the owner of the property. It will all be listed on a schedule, so the trustee will have an easy go of it, and this will ultimately pay dividends to the beneficiaries.
Unfortunately, a significant percentage of elders become unable to make sound decisions at some point in time. Alzheimer’s strikes about one-third of the oldest old, and this is not the only cause of dementia.
When you have a living trust, you can act as the trustee while you are living alive and well. You lose no control, and you have complete access to the resources.
In the trust declaration, you can name a disability trustee. This individual or entity would be empowered to administer the trust if you ever become unable to do so yourself.
If you have a loved one on your inheritance list that is not good at managing money, you may have concerns about leaving this person a direct, lump-sum inheritance. The situation can be compounded if you think that future creditors may attach the bequest.
To account for this, you could establish a living trust with a spendthrift provision. The principal would be protected from creditors, and you could instruct the trustee to distribute limited assets incrementally over time.
A lot of people think that the executor can quickly and efficiently distribute assets to the inheritors when a last will is used. In fact, this is not the case at all.
The will would be admitted to probate, and the court would supervise during the administration process. No inheritances would be distributed while the estate is being probated, and this can take close to a year or even longer.
When you use a living trust instead, the drawbacks are avoided. The trustee can distribute assets in accordance with your wishes outside of the probate process.