A lot of people think that a last will is the right choice as an asset transfer vehicle unless you are a multimillionaire with estate tax concerns. In fact, this is nothing more or less than a commonly held misconception.
Yes, it is true that high-net-worth individuals use trusts to gain estate tax efficiency, but these would be irrevocable trusts. People who have been successful without entering the true financial stratosphere could benefit from another type of trust called a revocable living trust.
Probate Process
To understand the value of a living trust, you have to learn some basic facts about probate.
If you were to use a last will to state your final wishes instead of a living trust, the executor that you name in the document would serve as the estate administrator. Contrary to popular belief, the executor would not be able to follow the instructions and distribute assets to the inheritors independently.
Under the laws of the state of Connecticut, the will would be admitted to probate, and the court would provide supervision during the process.
Access to Sensitive Information
At various times, you may have read about the way that celebrities who have died distributed their assets. Have you ever wondered why this information is available to the general public?
The answer is that probate records can be accessed by interested parties that go through the correct process.
This loss of privacy can be disconcerting in a general sense, and the information could cause acrimony among surviving family members and other interested parties.
Other Probate Drawbacks
The privacy issue is one of the drawbacks of probate, and the time consumption is another major negative. It will take somewhere between eight months to a year for probate to run its course, and no inheritances can be distributed until the court closes the estate.
Expenses pile up during probate, and this money comes out of the pockets of the heirs. Plus, it opens up a window of opportunity for disgruntled parties that may want to challenge the validity of the will.
Revocable Living Trust
When a living trust is used in lieu of a last will, these drawbacks are avoided. The trustee would be able to distribute assets to the beneficiaries outside of probate.
The probate avoidance is key, and another major benefit is the ability to include a spendthrift clause to protect a beneficiary that may not be good at handling money. You could instruct the trustee to distribute limited assets over an extended period of time to prolong the viability of the trust.
Since the beneficiary would not have access to the principal, his or her creditors would also be unable to reach the funds that are in the trust.
Disability Planning
A significant percentage of elders become unable to make sound decisions at some point in time, and you can account for this when you create a revocable living trust.
You can act as the trustee while you are alive and fully capable, and you could name a disability trustee to take over these duties if you ever become incapacitated.
Streamlined Estate Administration
When a living trust has been established, the trustee will have easy access to all of the resources that comprise the estate. This streamlines the estate administration process. You can also include a document called a pour-over will to allow the trust to absorb assets that were never signed over to the trust.
Attend a Special Event
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To see the dates, visit our events page and follow the simple instructions to register.
We Are Here to Help!
If you would like to engage a Glastonbury or Westport, Connecticut estate planning lawyer to help you put a plan in place, our doors are open. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.
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