Many people mistakenly believe that only millionaires need to implement a Living Trust as a major component of a basic housing plan. For each person whose total individual wealth exceeds $100,000, a Trust must be created. Remember, that $100,000 figure includes your house, your bank account, your car, your brokerage account, jewelry, paintings, baseball card collection, and yes, that even includes the life insurance policy you had when you died. Although the beneficiary will collect all benefits without any income tax liability, your property will be subject to property tax on the amount of the benefit.
There are four main advantages to using a Living Trust for your estate planning needs rather than relying entirely on a will.
First, all wills need to be proven. Whatever you had at the time of your death needs to be proven. Attorney’s fees range from three (3) to ten (10) percent of the estate. Personal and executor representatives are also entitled to fees. Trust assets do not go through probate. This way you save on attorney fees and executor fees. For more on the perils of wills, please contact my office for a copy of the article, Avoiding Endorsement at All costs.
Another advantage of using a Living Trust is the efficiency with which it can be used to design assets. Probating a Will usually takes between six (6) months and two (2) years. If a property tax return is due, probate takes a minimum of one year. I have a client who is in his fourth year of probate. So far, these assets are bound and cannot be enjoyed by the beneficiaries. Trust assets, on the other hand, can be distributed without the involvement of a lawyer or court and therefore can be distributed more quickly. In many cases, it is as easy as the Trustee providing copies of the Trustee and Death Certificate to access and distribute assets.
The third advantage is control. With a will, once your assets are distributed to your heirs, you no longer have control over them. Your beneficiaries may recklessly spend their inheritance on cars, drugs, alcohol, or worse. If they are responsible enough to keep the money given to them, they may still take it through litigation, divorce, or even creditors. By using a Trust to distribute your assets, you can protect your beneficiaries from losing the assets you designed for them and from others trying to take assets from them. When you die, your Living Trust becomes an Irrevocable Trust and forms a layer of asset protection for your beneficiaries.
One other way Belief in Life is superior to Simple Will is privacy. Upon death, the Will is recorded and the public can view or purchase a copy. The will becomes a public record, as does any dispute arising out of it, which could embarrass your family. Trust should not be recorded. If you wish, no one should know the exact terms of your Trust except you, your attorney, and the Trustee whom you identify as the person or entity tasked with enforcing the Trust.
