When you retain personal ownership of your property through the time of your death and use a will as your vehicle of transfer your estate is going to have to go through the process of probate. During this period the court will examine your will to determine its validity, and if it was to be contested the probate or surrogate court would be the venue. Any creditors who have claims against the estate must be notified and satisfied, and the assets in the estate must be inventoried and readied for distribution in accordance with your wishes.
Who does all of this? That would be the executor with the assistance of a probate lawyer, and both of them are entitled to a fee. The court itself also charges a fee. Plus, as you might imagine all of this is time consuming. Your heirs may not see their inheritances for months or even years in some cases as the process of probate slowly runs its course.
So there are pitfalls that go along with probate, and the way that many people choose to avoid it is through the creation of revocable living trusts. With these vehicles you place your assets into the trust and initially name yourself as both the trustee and the beneficiary. In this manner you retain control of the resources in the trust throughout your life. You then name a successor trustee, usually a bank or trust company, and a successor beneficiary.
When you pass on, the transfer of the assets in the trust is not subject to the probate process. Your beneficiary will simply receive direct distributions from the trust in the manner that you stipulated when you originally drew up the trust agreement. Many people choose to keep the principal intact and allow for distributions from the earnings of the trust only, prolonging its viability to potentially endure into the third generation.
- CRT: Best Tool for Proposed Tax Changes? - June 9, 2021
- Tax Proposals Could Alter Estate Planning Landscape - June 2, 2021
- Beneficiary Designations - May 13, 2021
