You may assume that you should use a will as your estate planning centerpiece because you have heard some things that are not true.
In this post, we look at some of these misconceptions and a few scenarios that would call for the utilization of a trust instead of a will.
Estate Planning Myths
There is a widely embraced falsehood about wealthy people and trusts that you should definitely get past. You do not have to be extremely wealthy to benefit from the utilization of a trust of some kind.
Yes, there are irrevocable trusts that are used by high net worth individuals that are exposed to estate taxes. However, there are other trusts that can be ideal for people of relatively ordinary means.
Another misconception is the idea that you lose control of assets that you convey into a trust. If you have a living trust, you would be the trustee while you are alive, so you would have total control of the assets. As the name would indicate, you would retain the right revocation, so you could dissolve the trust entirely and take back direct personal possession of the property.
The third myth is the expense factor. Some people are under the impression that you have to pay exorbitant legal fees to create a trust, and this is simply not the case. In fact, an investment that you make to establish a perfectly constructed estate plan will pay dividends in the long run.
Now that we have debunked the myths, we can explain some of the scenarios that can be addressed through the use of a trust. If you leave someone an inheritance through the terms of a will, they would receive their bequest in lump sum, and there would be no asset protection.
This can be a source of concern if you have someone in the family that is not good with money, but there is a solution. You could make the person in question the beneficiary of a revocable living trust.
After you are gone, the successor trustee that you name in the trust declaration would administer the trust. A spendthrift clause can be included, and the trust would become irrevocable after your death.
The creditors of the beneficiary would not be able to touch the assets in the trust, and you could instruct the trustee to provide modest incremental distributions on a monthly basis. This is one possible arrangement, but you would have the power to dictate the distribution terms.
Efficient Estate Administration
If you use a will to state your final wishes, it would be admitted to probate. This is a costly and time-consuming legal process, and no inheritances are distributed until the estate has been probated and closed by the court.
Probate expenses consume a portion of the estate before it is transferred to the heirs, and anyone that is interested can access probate records to find out how the assets were distributed.
These drawbacks can be avoided if you use a living trust to facilitate asset transfers after you are gone. The trustee would be able to distribute assets to the beneficiaries outside of probate, so the estate administration process would be simplified and streamlined.
We Are Here to Help!
Our doors are open if you are ready to work with a Fayetteville, Arkansas estate planning lawyer to put a plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 479-443-0062.
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