In reality, there are very significant differences. First of all, if you maintain direct personal possession of your property and use a will to state your wishes regarding its distribution after your passing, the heirs are going to be forced to play a waiting game.
The executor that you name in the last will would admit the will to probate, and the probate court would supervise the administration of the estate. This process will typically take around nine months to a year, even if things go very smoothly. No inheritances can be distributed during this interim.
Plus, the inheritors would eventually receive direct, lump sum inheritances. There would be no spendthrift protections, so a poor money manager could burn through his or her inheritance quickly and run into difficulties later on.
You could avoid these pitfalls if you were to use a revocable living trust instead of a last will. When assets have been conveyed into a living trust, the trustee that is named in the trust declaration would be empowered to distribute assets to the beneficiaries outside of probate.
Plus, spendthrift protections could be included. You could instruct the trustee to distribute limited assets over an extended period of time.
More Advanced Objectives
A living trust can be more effective than a last will when relatively simple circumstances exist. However, there are other types of trusts that can satisfy more advanced objectives.
One of these objectives would be asset protection. There are trusts that can be used by people who want to protect assets from legal judgments.
Estate tax efficiency can also be achieved through the utilization of certain types of trusts. There is a federal estate tax that can be applicable on asset transfers that exceed $5.43 million. We practice in Connecticut, and there is a state-level estate tax to contend with in our state as well. This death tax can be applied on transfers that exceed $2 million in value.
There is also the matter of special needs planning. If you leave assets to a loved one with a disability who is enrolled in government benefit programs through the terms of a will, benefit eligibility could be lost.
A special needs trust can be utilized under these circumstances. Assets in the trust could be used by the trustee to make the beneficiary more comfortable, but benefit eligibility would not be impacted.
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If you like to learn more about trusts, contact us through this page to schedule a free, no obligation consultation: Hartford CT Estate Planning Attorneys.
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