Have you have heard the old adage “Only two things that are certain in this life are death and taxes”? Naturally, both of these reasons are often cited as motive for using a Living Trust instead of a simple Will. However, the increase of the estate tax exemption allows most of us to avoid estate taxes. So, is avoiding the expense of probate worth the upfront costs associated with creating a trust? The simple answer is yes. But let me explain.
- Revisions are a snap. With a living trust, the trust itself is named the beneficiary of all of your assets—including IRAs and life insurance policies. If you decide to make changes how you want to distribute your assets, you only need to change your living trust and that automatically changes everything on down the line. A Will, however, only covers assets that do not have a beneficiary designation. So changing the terms of your Will means having to also change the beneficiary information for your IRA, life insurance policy, etc., individually.
- Executors or Administrators Receive Immediate Authority. A power of attorney dies with the person who gave it. The Executor or Administrator of an estate is only authorized to act upon being appointed by the court. This means if you have minor or beneficiaries with special needs, funds may not be immediately available. This also means no one is managing financial investments and, if the deceased owned a small proprietorship business, no one is legally in charge.
- Financial Information Stays Private. In any probate proceeding, the name and address of each beneficiary becomes a matter of public record, as does the value of your estate. Often, the court requires a full inventory of every asset within the estate. The inventory, eventually, becomes a matter of public record so that everyone knows the value of the estate.
- Avoid a Contested Will. If a Will contest is filed, the estate cannot be settled or distributed until it has been resolved. With a Living Will, a separate lawsuit must be filed to formerly contest. Since the terms of a Living Trust are generally not public record, the lawsuit would have to be filed blindly.
- Protect Estates from Creditors and Ex-Spouses. A Living Trust provides avenues for you to protect the inheritance left for your loved ones from creditors and/or ex-spouses. This protection alone is a compelling reason to have a Living Trust.
- Controlling Your Estate After Your Primary Beneficiary Dies. If you are divorced and remarried with children from the previous marriage, what happens if you die first? Your spouse’s Will is going to control the rest of your estate. Will your children still receive the inheritance you wanted to provide them? You can ensure your children receive that inheritance with a Living Trust. The same holds true if you want to make sure that whatever is left of an inheritance you leave for an adult child goes to your grandchildren, rather than an in-law (or ex-in-law) should your child divorce.
- Providing for Special Needs Beneficiaries Without Causing Them to Lose Benefits Eligibility.While a large inheritance is often well intended, receiving an inheritance outright usually causes a person with special needs to immediately lose eligibility for government benefits. A Living Trust can include appropriate provisions for a person with special needs to guarantee your ability to help meet his or her other needs, such as clothing, education, transportation, or recreation, without causing a loss of government benefits.
If you would like more information on the benefits of a Living Trust, or any other Estate Planning tool, feel free to contact me at 618-659-4499 or e-mail me at firstname.lastname@example.org. Be sure to check out the Estate Planning tab on our website, www.sivialaw.com.