A living trust is the ideal alternative to a simple will for people that value efficient administration and heightened control capabilities. In this post, we will share some basic information about living trust administration so you understand the benefits.
One major living trust advantage is the avoidance of probate. If you use a will, you name an executor to act as the administrator. After your passing, the document would be admitted to probate, and the court would provide supervision during the administration phase.
Creditors are notified during probate, and final debts are paid. There is a proving of the will, so the court will examine the document to make sure that it is valid. If anyone wants to contest the will, they can make an argument during probate.
All this sounds harmless enough, but there are some inherent negatives. The process will usually take eight or nine months at minimum, and the inheritors do not receive anything while the estate is being probated.
Probate expenses reduce the value of the estate, and the records are available to the general public, so there is a loss of privacy.
Asset distributions through the terms of a living trust are not subject to probate, so the administration process is streamlined. Plus, the assets are consolidated under the trust ownership umbrella, and this adds to the efficiency.
If you establish a living trust, you would act as the trustee while you are living, so you would have complete control of the assets. You could add property to the trust at any time, and you can change the terms if you choose to do so.
Plus, the trust would be irrevocable, so you could dissolve the trust and take back direct personal possession of the property.
Many elders become unable to make sound decisions at some point due to cognitive impairment, and physical ailments can rob a patient of their decision making capabilities. To account for this, you can name a disability trustee to assume the role in the event of your incapacity.
The trust will ultimately serve as an estate planning vehicle, so you name a successor trustee to administer the trust after your passing. You can designate someone that you know personally, and there are also professional fiduciaries that provide trustee services.
Which is the better choice? In large part, it will depend on your intentions, the extent of the funding, and the capabilities of the people you know that would be willing to take on the responsibility.
One of the benefits is the ability to protect the assets from the beneficiaries’ creditors, and you can instruct the trustee to distribute limited assets on an incremental basis. If there are income-producing assets in the trust, it could remain intact for an extended period of time.
It is also possible to have the trustee distribute all the assets immediately after your passing, so the level of expertise that is needed will depend on the framework. A professional is probably a better choice if you have a trust with a robust store of assets that must be effectively managed.
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