Living Trust: Popular Estate Alternative to Wills and Probate
A living trust has become a popular estate alternative to wills and probate. There are many reasons, including greater organization, greater assurance of complete probate avoidance and lower total cost than probate (compared to will preparation and probate, the combined cost of preparation and administration of the trust is usually significantly less).
Since probate has significant drawbacks, including complexity, cost, lack of privacy, delay, and danger of unintended disposition, many people prefer to avoid it by using other estate alternatives. You may already have a will or trust to ensure that your current and future assets will be distributed to your beneficiaries with ease and minimal cost. Or, maybe you do not. Either way, here are a few steps you can take to make sure that your current estate plan will work for you and your family.
If you already have documents in place, start by reviewing your current estate plan. You’ll want to make sure that your estate documents are current. It is very important to make sure that you understand what you have. Many times, people have estate documents drawn up by their legal advisor and never take time to discuss or understand what they have. If your will or wills (if married) or trust is outdated, or if you do not have estate documents in place, you will want to work with an experienced advisor to help you put the appropriate plan in place consistent with your goals.
By taking steps to put the appropriate plan in place, you can avoid the possibility of your estate being inherited by someone you may have never met. Maybe you’ve even heard about someone who died and left everything to his or her spouse who later remarried and then died very shortly thereafter, leaving the entire fortune to a virtual stranger - where the children from the first marriage did not receive anything. Or, maybe you know someone who left a son or daughter a large inheritance that he or she used to buy a new home. After getting a divorce, his or her spouse ended up getting the house in a divorce settlement.
A living trust can help you organize your financial affairs in a manner that minimizes income and estate taxes. You can transfer the ownership of just about any type of property to a trust, and either withdraw or reinvest all of the income generated by trust assets during your lifetime. A living trust can facilitate the management of your assets in the event of your incapacity and, according to the provisions of the trust, a trustee of your choosing can manage the trust and your property for the benefit of your loved ones.
The flexibility of a trust is what makes it ideal for a wide
range of individuals. Since a living trust is a private agreement,
information concerning the contents remains private. A trust can be
funded during your lifetime and a bypass (or credit shelter trust) can
ensure that each person can fully utilize their estate tax exemption of
$2 million (for 2008). In addition to a living trust, there are other
estate preservation vehicles that may benefit you and your family
depending on the complexity of your estate.
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