In our last post, we looked at three reasons why you may want to use a trust instead of a will, and we will complete the series with a few additional reasons.
Many people think that a will is the best choice for most people because of the simplicity. They assume that the executor that is named in the document can distribute the assets shortly after the passing of the decedent.
In reality, the administration of a will is far more complicated. The document would be admitted to probate, which is a legal process that takes place under the supervision of a court.
During probate, a notice must be posted for creditors, and they are given a significant amount of time to come forward. The assets that comprise the estate must be identified and inventoried by the executor, and they have to be prepared for distribution.
Probate expenses include the executor’s remuneration, possible legal and accounting fees, appraisal and liquidation charges, a filing fee with the court, and other administrative costs. The red ink will typically consume between three percent and seven percent of the value of the estate.
Most people value their privacy when it comes to financial matters. If you arrange for asset transfers through the terms of a will, the records will be readily available to anyone that has an interest.
You can avoid all these drawbacks if you use a revocable living trust as the centerpiece of your estate plan. There would be no loss of control of the assets, because you would act as the trustee and the beneficiary while you are alive and well.
After your passing, the successor trustee that you name would follow your instructions and distribute the assets to the beneficiaries in accordance with your wishes. The probate court would not be involved at all, so the negatives that we described above would be avoided.
Inheritance Protection Upon Remarriage
If you are getting remarried as a parent, you may have some estate planning concerns. You want to provide for your new spouse appropriately, but you don’t want to risk the inheritances that you intend to leave to your children.
This type of situation is particularly relevant if you are financially successful and your spouse-to-be is likely to outlive you. If you leave your spouse a sizable inheritance in a will with the idea that they will take care of your children when the time comes, there are no guarantees.
An estate planning device called a qualified terminable interest property (QTIP) trust is the ideal solution. You would fund the trust and you name a trustee to act as the administrator. Your spouse-to-be would be the beneficiary, and your children would be the successor beneficiaries.
If you die first, the trustee will distribute earnings that are generated by assets in the trust to your spouse throughout their life. You could give the trustee the latitude to distribute portions of the principal if this is your choice, and your surviving spouse could use property that is owned by the trust.
The first beneficiary would not be able to change the terms of the trust. After their passing, your children would inherit the assets that remain in the qualified terminable interest property trust.
Schedule a Consultation Today!
We shared this information to underscore the fact that there are many different ways that you can proceed when you are planning your estate. The right choice will depend upon the circumstances, and this is why you should discuss all of your options with an attorney.
If you are ready to do just that, you can send us a message to request a consultation at our Burbank, CA estate planning office, and we can be reached by phone at 818-937-2335.