There are some very good reasons to use a living trust instead of a last will, and many people are not aware of the advantages until they discuss the matter with an estate planning attorney. One of the benefits is the consolidation of assets. All the resources that comprise the estate can be easily identified by the trustee, so the estate administration process is simpler and more efficient.
You can even account for assets that may still be in your possession at the time of your passing through the inclusion of a pour over will. This document would allow the assets to “pour over” into the trust after you are gone when the proper steps have been taken by the trustee.
With a spendthrift clause, you can make sure that a loved one that is not good at handling money will not squander his or her inheritance too quickly. You can instruct the trustee to distribute assets on an incremental basis, and the beneficiary would have no direct access to the principal. Because of this, the principal would also be out of the reach of the beneficiary’s creditors.
A will must be admitted to probate after the passing of the decedent. This is a legal process that takes place under the supervision of a county court. It is time-consuming, so the inheritors must play the waiting game, and there are considerable expenses that pile up during probate.
One of the responsibilities of the court is to make sure that the will is in fact a last will that has been executed in a legally binding manner. For this reason, anyone that wants to contest the validity of the will, or present a more recent one, has an open window of opportunity during the probate process.
The ability to present a challenge is a safeguard that serves a purpose when a contest is valid. This being stated, disgruntled individuals sometimes “grasp at straws.” This slows down an already lengthy process, and the situation will invariably generate some significant hard feelings among interested parties.
When a living trust has been utilized in lieu of a last will, the trustee can distribute assets outside of the process of probate. As a result, the drawbacks listed above are avoided, and there is no built-in opportunity to present estate challenges.
Living Trust No-Contest Clause
Since probate is not a factor when a living trust is in place, anyone that wants to contest the terms would not have a wide open, pre-existing avenue. This being stated, it is possible to file a lawsuit in an effort to prove that the trust terms were recorded under illegitimate circumstances.
For example, someone could contend that the person that established the trust was not of sound mind at the time. An alternate contention would be that the grantor of the trust was being threatened or unduly coerced. Fraud could be another accusation.
If you are creating a living trust with the knowledge that someone that has been named as a beneficiary is probably going to be unhappy with the terms, you could include a no contest clause. This would trigger the total disinheritance of anyone that takes legal action to contest the terms of the trust.
A person who feels as though they want to go forward with a lawsuit anyway can do so, but they would be taking a big risk. It is also rather expensive to engage legal counsel to handle the case. So in summary, a living trust can be challenged, but it is complicated, potentially risky, and costly.
Attend a Free Seminar!
Our attorneys are holding a series of estate planning seminars over the coming weeks, and we get extremely positive feedback from everyone that attends these sessions. We are particularly excited about the material that we will be presenting this time around, and we look forward to meeting members of our community.
These seminars are being offered on a complimentary basis, so you get all of this knowledge without reaching into your pocket to pay an admission fee. We do ask that you register in advance, and you can visit our seminar page to see the schedule and obtain detailed registration information.
If you have any questions, or if you would like to contact us to schedule a consultation, we can be reached by phone at 513-721-1513.