Many people who are not wealthy assume that trusts are only useful for high net worth individuals. They are under the impression that last wills are for "the rest of us."
This may be a mistaken assumption. All trusts are not created equal. Different trusts serve different purposes. Yes, there are trusts that are used to accomplish objectives that are needed primarily for the wealthy. On the other hand, there are other types of trusts that would not only be useful to high net worth individuals, but to the "mere mortal," as well.
One of these trusts is the revocable living trust.
The Value of a Revocable Living Trust
With a revocable living trust you as the person creating the trust will be referred to as the trustor. You name a trustee to administer the trust. You also name a beneficiary or beneficiaries who will receive distributions out of the trust.
At first you as the trustor can act as both the trustee and the beneficiary. Under this arrangement you do not surrender control of the assets while you are living. Further, because the trust is revocable, you can actually dissolve it at any time. You can also amend the terms and add or subtract beneficiaries as you see fit.
In the trust agreement you name a successor trustee who will assume this role after your death or incapacity. This is the individual or entity that will administer the trust in accordance with your wishes.
You can ask someone you know to act as trustee. However, there are other options. First of all, you may not have a personal relationship with anyone who has experience in asset management.
Secondly, even if you did know someone who is qualified, if he or she passes away or becomes incapacitated, you should have an alternate to replace them.
As an alternative you could name a trust company or the trust department of a bank to act as trustee.
When you convey assets into a living trust, your beneficiaries will receive their inheritances outside of the process of probate. When you use a will the estate must be probated before inheritances are distributed.
Probate can take a significant amount of time. There are also expenses incurred during probate. Probate costs will decrease the amount of the inheritances that will be received by the heirs.
With a living trust probate is not a factor. The trustee distributes assets to the beneficiaries in a fast and efficient manner.
Another benefit is the fact that you can include the selection of a disability trustee. If you were to become incapacitated and unable to handle your financial affairs, this disability trustee would administer the trust on your behalf, because you are still the primary beneficiary.
You should be aware of the process of probate in Nevada when you are making preparations for the distribution of assets to your loved ones after your passing. When you hear some of the details you may decide that you would like to take steps to avoid probate.
If you have a will, it is filed by the executor and is reviewed by the court to determine its validity. If there is no will, the probate court will follow the "will" found in the statutes of the state where you reside. These are call the laws of intestate succession. During the probate process final debts of the deceased must be reviewed, allowed or challenged and, after approval by the court, paid by the executor out of estate funds.
This can include the payment of taxes, so services of an accountant are often necessary. Certain assets may need appraisals, and this can require the engagement of an appraiser or appraisers.
Because probate is a legal process the executor is also going to need the assistance of a probate lawyer in many cases.
When you add up the fees that will be charged by all these professionals they can be considerable. Further, the executor who is administering the estate is entitled to payment for his or her time and trouble.
One reason to avoid probate is to avoid these costs. Another is to reduce the time spent in administration that increases the wait for distribution to the beneficiaries.
Some people decide they want to avoid probate and they do it by adding a co-owner to property and financial accounts. This is called joint tenancy with right of survivorship.
The idea is that the surviving joint tenant inherits the property in question after the death of the other co-owner, without the need for probate.
There are a number of risks you take if you were to go this route.
Let's say that you make your brother the co-owner of your property. Someone sues your brother. The property you have worked for all of your life is suddenly fair game for the litigant seeking redress.
Another risk you take is that the person you add to your bank account has total access to the funds. Clearly you are going to select someone that you trust, but their creditors also have total access.
These are a couple of things to think about, but there are many other unintended consequences that can result if you use joint tenancy as an estate planning solution.
The creation of a revocable living trust would be a better way to avoid probate. You as the creator of the trust are called the "trustor" or "settlor." While you're living you can act as the trustee and the beneficiary so you have sole control of the assets.
Because the trust is revocable you can dissolve it if you wish, or amend and change the terms at any time. After your passing the trustee you choose to succeed you when you create the trust becomes the trustee. He or she then administers the estate outside of the courtroom and distributes the assets to the beneficiary or beneficiaries in accordance with your expressed wishes.