A living trust is a highly effective estate planning tool that can be the ideal asset transfer vehicle. When you establish a living trust, it is important to fund the trust right away, because it serves no purpose if the assets that comprise your estate have not been conveyed into the trust.
All different types of resources can be signed over to the trust, including your bank and brokerage accounts, your home and other real property, commodities, antiques and other valuable collectibles, and small business interests.
You do not have to be concerned about losing control of these assets, because the trust would own them, but you would be the trustee. As a result, you would have direct access at all times, and you would retain the right revocation.
The Probate Process
One of the major reasons why people use these trusts is to avoid the process of probate. This is a legal proceeding that is necessary when a will is utilized to transfer assets. The executor admits the will to probate, and the court provides supervision during the administration process.
Probate is often avoided because of three major drawbacks, and one of them is the cost factor. The expenses that accumulate during probate consume a portion of the estate before it is distributed to the heirs.
Another pitfall is the time consumption. If there are no complications, an estate can pass through probate in about eight months at minimum in most jurisdictions. No one wants to play this type of waiting game when they are entitled to an inheritance.
The other major negative is the loss of privacy. Probate records are available to the general public, so they can be accessed by anyone that is interested.
If you use a living trust instead of a will as your primary asset transfer vehicle, the distributions would not be subject to probate, so these hassles would be avoided.
Now that we have set the stage appropriately, we can answer the question that serves as the title this post. Assets that were not conveyed into your living trust would be transferred through the probate process, so you defeat the purpose of the trust if the funding is incomplete.
The assets that are outside of your trust would be subject to probate if you do nothing to address the possibility in advance, but there is a step you can take to cover this base.
A pour-over will is a document that can be used to facilitate the transfer of personally held assets into the trust. The will would be filed with court, but the process would be simple and straightforward, and the outcome would be a foregone conclusion.
Additional Living Trust Benefit
Probate avoidance is a major positive, but there is another very good reason to use a living trust. If you have someone on your inheritance list that is not good with money, you may not want to leave a direct inheritance with no strings attached.
Assets that are transferred through a simple will are distributed in a lump sum, but you have options if you use a revocable living trust. You can include a spendthrift clause, and this would protect the principal from the beneficiary’s creditors after you are gone.
In the trust declaration, you can leave instructions for the trustee with regard to the way you want the assets to be distributed. You could provide incremental distributions over an extended period of time to limit the beneficiary’s ability to spend too freely.
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You can see the dates if you head over to our seminar page, and when you identify the session you would like to attend, follow the instructions to register.
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If you are ready to work with a Glastonbury, Connecticut estate planning lawyer to put a plan in place, we are here to help. You can send us a message through our contact page to schedule a consultation, and we can be reached by phone at 860-548-1000.