In some instances, a client will come to us looking for help because of a bad situation that has developed due to a lack of informed planning. We do what we can under these circumstances, and there are damage control strategies that can sometimes be implemented.
These situations are a bit frustrating for us, because we know how easy it could have been to avoid the difficulties. With this in mind, we will look at a handful of common estate planning mistakes that are made in an effort to increase awareness.
If you have been successful enough to be able to leave behind a suitable legacy for your loved ones, a last will may not be the right choice for you as an asset transfer vehicle. The notion that trusts are only for the wealthy is a major misconception that is harbored by far too many individuals that are not well-informed.
As we will look at in another section, there are certain types of trust that can be useful for people that have advanced estate planning concerns, like death tax exposure. This being stated, a revocable living trust is a legal device that can be useful for a wide range of people that are not in the upper financial stratosphere.
A living trust would actually not be the right choice for high net worth individuals. You retain incidents of ownership when you establish this type of trust, because you can in fact revoke the trust, and you can act as the trustee and the beneficiary while you are alive and well.
This is a positive for many people that would not like to surrender control of their assets permanently. It would not be good for those that want to get assets out of their own name for certain reasons.
One of the major benefits that you gain through the creation of a revocable living trust is the avoidance of probate. This is a time-consuming, intrusive, and expensive legal process that would enter the picture if you use a last will to state your final wishes.
All the assets are consolidated in one place, and this is another positive. Plus, with a last will, there is an open forum for disgruntled parties to present estate challenges. It is much more difficult to contest the terms of a revocable living trust.
Unfortunately, countless families find out about the pitfalls of wills and the probate process when it is too late to do anything about it.
Another problem with a last will is the fact that, generally speaking, you would be facilitating lump-sum asset transfers to the people that are named in the document. A spendthrift inheritor could burn through their inheritance much too quickly and have nowhere to turn for assistance later on.
If you use a living trust instead of a will, you could include a spendthrift provision. This would allow the trustee to distribute assets to the beneficiary incrementally in accordance with your wishes. The resources would also be out of the reach of the beneficiary’s creditors.
As we have stated, you can act as the trustee of your living trust while you are alive. In the trust declaration, you name a successor trustee to handle the trust administration tasks after you pass away. Some people choose someone that they know personally that they trust in a broad sense, but this can be a major blunder.
It takes a significant amount of financial acumen to administer a living trust effectively, and there are legal guidelines that must be followed to the letter. The trust administration process can be time intensive, and the trustee could face personal liability issues if mistakes are made.
You can avoid these potential problems if you engage a professional that offers fiduciary services. We would be more than glad to act as the trustee of your living trust or any other type of trust that you create during the estate planning process.
When you have a professional at the helm, you can be certain that your trust will be administered properly.
We are here to help if you would like to consult with a licensed estate planning attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 775-823-9455.