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Many people incorrectly believe that only millionaires need to implement a Living Trust as a primary component to a foundational estate plan. For any person whose total individual estate exceeds $100,000, a Trust should be created. Remember, that $100,000 number includes your home, your bank accounts, your car, your brokerage accounts, jewelry, paintings, baseball card collections, and yes, it even includes any life insurance policy you own at the time you die. Even though the beneficiary will collect the full amount of the benefit without any income tax liability, your estate will be hit with an estate tax on that benefit amount.
There are four major advantages to using a Living Trust for your estate planning needs rather than relying completely on a Will.
First, all Wills need to be probated. Anything you own at the time of your death will need to be probated. Attorney fees range from three (3) to ten (10) percent of the estate. Personal representatives and executors are also entitled to a fee. Trust assets do not go through probate. Thus you save the attorney’s fee and the executor’s fee. For more on the perils of probate, please contact my office for a copy of the article, Avoiding Probate at All Costs.
Another advantage to using a Living Trust is the efficiency with which assets may be devised. Probating a Will usually takes between six (6) months and two (2) years. If an estate tax return is due, probate takes a minimum of one year. I have a client who is entering his fourth year of probate. The entire time, the assets are tied up and cannot be enjoyed by the beneficiaries. Trust assets, on the other hand, may be distributed without attorney or court involvement and therefore can be distributed faster. In many cases, it is as simple as the Trustee providing a copy of the Trust and a Death Certificate in order to access and distribute the assets.
A third advantage is control. With a Will, once your assets are distributed to your heirs, you cease to have any control over them. Your beneficiaries may frivolously spend away their inheritance on cars, drugs, alcohol, or worse. Should they be responsible enough to save the money given to them, they still might have it taken away through litigation, divorce, or even creditors. By using a Trust to distribute your assets, you can protect your beneficiaries from losing the assets you devised to them and from anyone else trying to take the assets from them. When you die, your Living Trust becomes an Irrevocable Trust and forms a layer of asset protection for your beneficiaries.
One other way a Living Trust is superior to a simple Will is privacy. Upon death, Wills are recorded and the public may view or purchase copies of it. The Will is made public record, as is any dispute arising from it, which may provide embarrassment to your family. Trusts do not have to be recorded. If you prefer, no one ever has to know the exact terms of your Trust except for you, your attorney, and the Trustee that you name as the person or entity charged with enforcing the Trust.
write by Fiona