Setting up a living trust is a good option for those who want to safeguard estate assets and pass them along after death. This strategy helps loved ones avoid having to endure probate and simplifies estate settlement procedures.
As with most estate planning methods, there are advantages and disadvantages of using a living trust. The primary advantage is trust property is exempt from probate which lessens the chance of the Will being contested.
The downside is the time and expense involved with funding the trust. Funding involves transferring ownership of assets to the trust. Any type of titled property has to have a new title issued in the name of the trust. This also holds true for life insurance policies and bank accounts.
Furthermore, any time assets are bought, sold, or transferred the trust must be updated to reflect changes. This results in additional filing and document recording fees. With that said, probate costs typically equate to the same or more, yet offer less protection.
The reasons to avoid probate are plentiful. Not only is the process costly and time-consuming, estate assets cannot be transferred to beneficiaries until every aspect of probate is complete. If complications arise that extend the duration of probate it could lead to depreciation in value.
Another concern is that family members can contest a probated Will and lay claim to assets which were not bequeathed to them. This results in having to hire a lawyer to resolve the issue. Since legal expenses are paid by the estate there is potential for a forced sale to cover costs associated with litigation.
While a last will and testament can expedite the process of probate it does not offer any protection if conservatorship is required. If a person becomes incapacitated due to physical or mental conditions their family will have to go to court to become the legal Conservator. This status allows them to make financial decisions and manage living arrangements for Conservatee’s until they are capable of making sound choices.
A living trust can be used to appoint a Conservator to handle personal affairs. Rather than having to hire a lawyer and appear in court, the designated Conservator can commence with necessary arrangements.
A Conservator plays a different role than a Trustee. Trustees are assigned to manage assets in the trust and handle estate settlement proceedings.
A source of confusion often stems from the terminology used with trusts. The person who owns the property and establishes the trust is known as the Trustor. Individuals who oversee the trust are Trustees. Most often, the Trustor is also the Trustee until death.
Upon death, a successor Trustee performs duties required to reconcile the estate and transfer assets to named beneficiaries. Naming a successor Trustee is especially important for married couples who utilize a joint trust.
As mentioned earlier, trusts are funded by transferring ownership of property and financial assets. If Trustors do not fund the trust in accordance with state laws the estate will have to pass through probate.
In addition to establishing living trusts, people ought to develop a complete estate plan consisting of a last Will and power of attorney forms. Wills are needed to convey property which is not included in the trust. Power of attorney forms allow others to take care of certain tasks on your behalf if you are unable to do so.
The best approach is to get help from an estate planning law firm. Attorneys can offer guidance regarding the best type of strategies for your personal circumstances and ensure all documents are legally binding.