Setting up a living trust is a good option for those who want to safeguard estate assets and pass them on after death. This strategy helps loved ones avoid having to bear probate and simplifies estate settlement procedures.
As with most estate planning methods, there are advantages and disadvantages to using a living trust. The main advantage is that the trust property is exempt from probate, which reduces the chance of the will being contested.
The downside is the time and expense involved in financing the trust. Financing involves the transfer of ownership of the assets to the trust. Any type of titled property must have a new title issued in the name of the trust. This is also true for life insurance policies and bank accounts.
Also, every time assets are bought, sold, or transferred, the trust must be updated to reflect the changes. This results in additional document filing and registration fees. That being said, probate costs are often the same or more, but offer less protection.
The reasons to avoid probate are plentiful. Not only is the process expensive and time consuming, but the assets of the estate cannot be transferred to the beneficiaries until all aspects of the probate have been completed. If complications arise that extend the length of the probate, it could cause a depreciation in value.
Another concern is that family members can challenge a probated will and claim assets that were not bequeathed to them. This results in having to hire a lawyer to resolve the issue. Since legal expenses are paid by the estate, there is the possibility of a forced sale to cover costs associated with litigation.
While a last will and testament can speed up the probate process, it does not offer any protection if guardianship is required. If a person becomes incapacitated due to physical or mental conditions, his family will have to go to court to become the legal guardian. This status allows them to make financial decisions and manage the living arrangements of the wards until they are capable of making sound decisions.
A living trust can be used to supplement a conservator to handle personal matters. Instead of having to hire a lawyer and appear in court, the appointed conservator can start making the necessary arrangements.
A curator plays a different role than an administrator. Trustees are assigned to manage the assets in the trust and handle the liquidation proceedings of the estate.
A source of confusion often arises from the terminology used with trusts. The person who owns the property and establishes the trust is known as the Settlor. The people who oversee the trust are trustees. Most of the time, the Settlor is also the Trustee until his death.
Upon death, a successor trustee performs the necessary functions to reconcile the estate and transfer assets to designated beneficiaries. Naming a successor trustee is especially important for married couples using a joint trust.
As mentioned above, trusts are financed through the transfer of property and financial assets. If the Settlors do not fund the trust in accordance with state law, the estate will have to go through probate.
In addition to establishing living trusts, individuals must develop a comprehensive estate plan consisting of a last will and power of attorney forms. Wills are needed to convey assets that are not included in the trust. Power of attorney forms allow others to handle certain tasks on your behalf if you are unable to do so.
The best approach is to get help from an estate planning law firm. Lawyers can offer guidance on the best type of strategies for your personal circumstances and ensure that all documents are legally binding.