A lot of people think that a last will is the right choice as an asset transfer vehicle unless you are a multimillionaire with estate tax concerns. In fact, this is nothing more than a commonly held misconception.
Yes, it is true that high net worth individuals use trusts to gain estate tax efficiency, but these would be irrevocable trusts. People that have been successful without entering the financial stratosphere could benefit from another type of trust, called a revocable living trust.
A Multitude of Benefits
There are many benefits to be gained through the utilization of a revocable living trust, but we will start with the one that inspired this particular blog post.
If you were to use a last will to state your final wishes instead of a living trust, the executor that you name in the document would take care of your affairs after death. Contrary to popular belief, the executor would not be able to follow the instructions and distribute assets to the inheritors independently.
Under the laws of the state of Illinois, if your probate assets are worth more than $100,00, or, in certain cases, if you own real estate, the will would be admitted to probate, and the court must approve the administration process.
At various times, you may have read about the way that celebrities that have died distributed their assets. Have you ever wondered why this information is available to the general public? The answer is that probate records can be accessed by anyone.
This loss of privacy can be disconcerting in a general sense, and the information could cause acrimony among surviving family members and other interested parties.
The privacy issue is one of the drawbacks of probate, and time consumption is another major negative. It will take somewhere between eight months to two years for an average probate case to run its course, and no inheritances can be distributed until the court closes the estate.
Expenses pile up during probate, and, in some cases, this money comes out of the pockets of the heirs until they can be reimbursed.
Plus, it opens up a window of opportunity for disgruntled parties that may want to challenge the validity of the will.
When a living trust is used in lieu of a last will, these drawbacks are avoided, because the trustee would be able to distribute assets to the beneficiaries outside of probate.
The probate avoidance is key, but another major benefit is the ability to include a spendthrift clause to protect a beneficiary that may not be good at handling money. You could instruct the trustee to distribute limited assets over an extended period of time to prolong the viability of the trust.
Since the beneficiary would not have access to the principal, his or her creditors would also be unable to reach the funds that are in the trust.
A significant percentage of elders become unable to make sound decisions at some point in time, and you can account for this when you create a living trust.
You can act as the trustee while you are alive and fully capable, and you could name a disability trustee to take over these duties if you ever become incapacitated.
When a living trust has been established, the trustee will have easy access to all of the resources that comprise the estate. This streamlines the estate administration process. You can also include a document called a pour over will to allow the trust to absorb assets that were never signed over to the trust.
Attend a Free Seminar!
We are conducting in-person seminars again, and it is gratifying to get out into the community to make connections with our neighbors. You can come away with a lot of very useful information if you join us, and there is no charge, so this is a great opportunity.
The dates are posted on our seminar schedule page, and when you identify the event you would like to attend, follow the instructions to register so we can reserve your seat
Need Help Now?
If you are interested in creating a living trust, or if you would like to discuss any other estate planning matter with a North Aurora, IL estate planning lawyer, our doors are open.
You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.