When you are planning your estate, you should evaluate all factors carefully. After all, you are arranging for the transfer of everything that you have earned to the people that you love the most. There are many different ways to proceed, so you should understand your options thoroughly. This is why legal counsel is so very useful when you are engaged in your estate planning efforts.
A lot of people think that a last will is the asset transfer vehicle that should be utilized if you are not a multimillionaire. In reality, this is not the case at all. In many instances, a revocable living trust will be a much better choice for a number of different reasons. We are going to highlight one of them in this blog post.
If you use a last will to state your final wishes with regard to the distribution of your assets, the people that are named in the will would receive lump sum inheritances. This may be fine for some people that will be receiving bequests. However, it can be a source of concern if you have doubts about the money management capabilities of a loved one. Under these circumstances, you may want to use a living trust instead of a last will.
When you establish a revocable living trust, you are called the grantor or settlor of the device. The trustee is the individual or entity that administers the trust, and the beneficiary can receive monetary distributions from the trust. While you are alive, you can serve as the trustee and the beneficiary, so you are in complete control. And of course, as the name would indicate, you have the power to revoke the trust entirely at any time.
In the trust declaration, you name a successor trustee to administer the trust after you are gone. It can be someone that you know personally, but there are professional fiduciaries that offer trust administration services. There are advantages to be gained through the utilization of a corporate trustee. However, on the other side of the coin, they charge hefty fees, so you have to balance the pros and cons.
To provide an example with regard to the possible spendthrift protections, let’s say that a son that you had late in life is the sole successor beneficiary, and he has never been very good with money. On many occasions, he has come to you to bail him out of difficult financial situations. If you leave him a large, direct inheritance, he may burn through it quickly and have nowhere to turn later on.
For the purposes of this example, you have conveyed income producing assets into the trust. You could instruct the trustee to calculate the annual earnings and provide monthly distributions that add up to equal the annual yield. The principal would remain intact to generate ongoing income, and the beneficiary would not be able to make self-defeating financial mistakes.
Of course, people tend to mature over time. If you choose to do so, you could give the trustee the discretion to distribute larger lump sums when the beneficiary reaches certain age thresholds.
This is just one example, but the point is, you can arrange for asset distributions in any manner that you choose when you have a revocable living trust in place.
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Written information is certainly quite useful, but there is no substitute for a one-on-one consultation with a licensed estate planning attorney. We know that it can be disconcerting to discuss personal matters with someone that you have just met, but you can rest assured that you will feel perfectly comfortable working with our firm.
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