Estate planning can seem like an exercise in formalizing your wishes in writing, and this is certainly a big part of the equation. At the same time, arranging for the distribution of your belongings to the people you love the most is an emotional act.
When you give gifts for very special occasions, the object is only part of the experience. Your heartfelt intentions are most important, and this should extend to your legacy planning efforts.
With this in mind, estate administration will enter the picture after you pass away. Someone will have to follow your instructions to bring your wishes to fruition. The way that you plan your estate will impact the experience that your loved ones will have during this phase.
Simple Wills and Probate
If you use a will to express your asset distribution choices, you would name an executor to act as the administrator. After your passing, the executor would admit the will to probate, and the court would provide supervision.
This will typically take 6 to 8 months at minimum, and this is the best case scenario. Inheritances cannot be distributed while the estate is being probated by the court.
Probate opens a window of opportunity for will challenges, and probate records are available to all interested parties. There are also a number of expenses that accumulate during probate. These debits reduce the amount of the inheritances that will be received by the heirs.
Living Trust Administration
A revocable living trust is a widely utilized alternative to a last will. You can act as the beneficiary and the trustee, so there is no loss of control of the assets. In the trust declaration, you name a trustee to succeed you, and your heirs would be the beneficiaries.
One of the benefits of a living trust is the ability to instruct the trustee to distribute limited assets over an extended period of time if this is your choice. You can also include a spendthrift provision to protect the principal from creditors if you have any concerns.
When the time comes, the successor trustee would follow the instructions that you record in the trust declaration. Assets would be distributed to the beneficiaries, and the probate court would not be involved. As a result, the drawbacks of probate would be avoided.
Other Types of Trusts
In addition to the living trust, there are other types of trusts that satisfy different objectives. The trustee would be the administrator for any type of trust, and from a legal perspective, any adult can act as a trustee.
There are specific guidelines that must be followed to adhere to certain laws, and there can be issues like longevity and conflicts of interest. And of course, the trustee should be someone that is fully capable of handling sensitive financial, accounting, and administrative tasks.
If you do not personally know anyone that would be a suitable candidate, you have another option. Trust companies, the trust departments of banks, and some other entities provide professional trustee services, and this can be the right choice for some people.
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