Estate planning is an important legal process that creates a formal plan for what happens to your assets during incapacity or after your passing. By creating a formal estate plan, you can minimize the legal and financial hurdles your family would otherwise encounter during estate administration.
Trusts are a crucial aspect of estate planning. This requires establishing a living trust, an estate planning tool that helps family members, heirs, and other beneficiaries avoid a lengthy, often complex legal process for settling the affairs of your estate.
The process of estate planning and setting up estate planning trusts is time-consuming and complicated. However, it is a necessary process that puts you on the right path toward achieving your goals and leaving a lasting legacy for your loved ones.
Read on to learn about the various pros and cons of having a trust.
What is a Trust?
A trust is a legal arrangement that provides for the transfer of assets from the owner to the trustee. The terms for the transfer are contained within the trust agreement, including how assets are distributed to their designated beneficiaries and how the assets will ultimately be distributed.
Unlike wills, which only take effect upon the death of the testator (owner of the will), trusts can immediately take effect when assets are transferred to them.
Pros and Cons of a Trust
- Avoiding Probate: Probate is the legal process by which the court establishes a will’s validity and ensures that all debts and asset transfers are settled. This is an incredibly lengthy and expensive process, with legal fees, executor fees, inventory fees, and other costs needing to be paid before assets can be fully distributed to all beneficiaries with a fully funded trust. The distribution of assets is handled according to the terms of the trust, avoiding the probate process altogether.
- Avoid Conservatorship During Incapacity: If you are incapacitated or unable to manage your own affairs due to a medical condition, the terms of the trust are immediately enforced, allowing your wishes to be honored regarding control over your assets. This is especially comforting for families who do not have to worry about court control of the incapacitated person’s finances.
- Retain Full Control: The creation of a trust allows you to retain complete control over how your assets are distributed after your passing. Using the trust, you can implement controls to limit or prohibit the creditors and ex-spouses of your beneficiaries from receiving your money. You can also delay the distribution and control of assets until your children reach a certain age and ensure the continued coverage or protection of children with special needs.
- Complete Flexibility: Full control over your assets can extend beyond your direct heirs or beneficiaries. With a funded revocable trust, you can name banks, trust companies, attorneys or CPAs to serve as your primary administrator in the event of your death.
- Continuity of Investment: Securities do not have to be reregistered after the passing of their owner, given that these assets have already been transferred to the trust. Depending on your investment objectives and cash needs, you may not also need to develop a different investment strategy.
- Reregistration of Property: One caveat to creating a trust is that the property must be titled in the name of the trust before it can be included in the revocable trust. This may entail filing the necessary paperwork before a judiciary entity and the payment of filing fees. Any property that hasn’t been reregistered in the name of the trust will be subject to the probate process, even with a revocable trust in place.
- No Protection From Debt: Living Trusts do not provide creditor protection for the grantors. Under a revocable trust, creditors can obtain payment for debts owed. A grantor may, however, provide protection opportunities for their beneficiaries.
- Costly to Establish: A revocable trust costs substantially more to establish than a will since it requires funding the moment you form it.
Speak with a Trusted Administration Attorney at Wiles Law
A trust is a powerful legal instrument that can help you set your affairs in order in the event of your death and spare your family from having to do so on your behalf.
When setting up a trust, one thing to remember is to seek the expertise of a trust administration attorney who specializes in estate planning and is well-versed in trust administration. Finding the right attorney can make all the difference and make the entire process as seamless as possible.
If you need help with estate planning and setting up trusts, Wiles Law is here to help. Our estate planning attorneys pull from years of experience and expertise in estate planning law to help you with your legal arrangements and facilitate the efficient transfer of your property to your loved ones after your passing. Contact our offices today to schedule a consultation.