Before we get to the specific point of this post, we should provide some general information about the value of revocable living trusts. There are many benefits to be gained through the utilization of a living trust, and probate avoidance may be at the top of the list.
Probate can be described as the legal process of estate administration. If you use a Last Will to state your final wishes instead of a Living Trust, you would name an executor in the will. This individual or entity would administer the estate after you pass away, but they would not be empowered to do so without supervision.
The will would be admitted to probate, and the court would oversee the proceedings. During probate, final debts would be paid, and the assets would be inventoried and prepared for distribution to the heirs. All of this can be time-consuming, and no assets would be distributed during probate.
How time-consuming you ask? A simple case with no complications can take about eight months to a year. Speaking of complications, probate offers a window of opportunity for anyone that may want to challenge the validity of a will. Disgruntled parties could come forward, and this can prolong an already lengthy process.
The cost factor is another major negative. There can be legal expenses, court costs, accounting fees, appraisal charges, liquidation fees, commissions, and other incidentals. Money that goes out the window during probate could have otherwise gone to the rightful heirs of the estate.
If you use a Living Trust, all of these drawbacks are avoided. Assets in a Living Trust can be distributed by the trustee to the beneficiaries outside of the process of probate.
There is no loss of personal control of assets that you convey into a Revocable Living Trust. While you are alive and well, you can act as the trustee and the beneficiary. If you ever want to remove property from the trust or change the terms, you can do so at any time.
It is possible to account for incapacity when you establish a Living Trust, and this is important, because about 40 percent of people that are 85 years of age and older have Alzheimer’s disease. In the trust declaration, you can name a disability trustee to spring into action if you become incapacitated at some point in time.
With a Living Trust, you can include a spendthrift clause if you have concerns about the money management capabilities of someone on your inheritance list. The way that you structure it is up to you, but for example, you could instruct the trustee to distribute a certain amount to the beneficiary each month.
You would not be giving the beneficiary any access to the principal, so there would be no potential for rapid inheritance squandering. Plus, creditors of the beneficiary would “step into their shoes.” Since the beneficiary would not be able to touch the principal, the same dynamic would apply to their creditors.
Now that we have set the stage appropriately, we can get to the point of this post. After you establish a Revocable Living Trust, you may not convey everything that you own into it for one reason or another. As time goes on and you acquire new assets, you may have additional property in your possession that has not been signed over to the trust.
You can account for this through the inclusion of a Pour-Over Will in your broader estate plan. This type of will would allow the assets that are not in the trust to be poured into it after you pass away, but this process would be subject to probate.
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We have taken a brief look at Revocable Living Trusts and the Pour-Over Will in this blog post. A Living Trust may be the right choice for you, but it is just one of many tools in the estate planning toolkit.
Each case is different, and this is why personalized attention is so very important. If you would like to discuss your situation with a licensed estate planning attorney, our doors are open. You can send us a message to request a consultation appointment, and we can be reached by phone at 513-721-1513.