If you have not thought a lot about estate planning until now, you may assume that you will eventually go to an attorney to execute a Will. Many people know that trusts exist, but they assume that they are only useful for people that are extremely wealthy. In fact, this is a myth. There is a certain type of trust called a Revocable Living Trust that is very useful for most people. Let’s look at some of the benefits that are realized through the utilization of a Revocable Living Trust.
After you pass away, someone has to handle the estate administration tasks and get the assets into the hands of the beneficiaries. When a Will is used, this person or entity is called the executor or personal representative. If you have a considerable variety of assets that are all scattered about, the estate administration process can be very time-consuming and complicated. The administrator will have to search for all of the property that comprises the estate, and this can be a daunting task. If you have real property interests in more than one state, the personal representative may have to go through multiple different administrative processes in multiple states.
Things are entirely different when a Living Trust is used as the centerpiece of your estate plan. All of your assets can be transferred into the trust while you are still living. This consolidation would make things quite simple for the Trustee (that you name in the trust) to administer your estate.
Some people assume that an executor can distribute assets to the beneficiaries under a Will independently, without any supervision. In fact, this is not the case at all. According to the laws of the state of Nevada, the executor would be forced to admit the will to probate, and the probate court would supervise the administration of the estate.
There are a number of drawbacks that go along with the probate process if you are someone that is in line for an inheritance. First, there is a waiting game involved. It takes about nine months to a year for a simple case to pass through probate, and no inheritances can be distributed until the estate has been probated and closed by the court. More complicated estates, or estates that end up being challenged in court, could be tied up in probate for years.
Second, probate expenses are another pitfall. There are filing fees and the executor’s payment for his or her time trouble. The executor will usually hire a probate lawyer, so legal fees enter the picture. And there are accounting, liquidation, and appraisal expenses. After you add in miscellaneous costs, you are looking at a significant figure, and these expenditures reduce the value of the estate before it is transferred to the heirs.
Finally, one of the biggest problems with probate is the loss of privacy. In some cases, after a very high profile person dies, the press reveals all types of information about how the assets were distributed. You may wonder how this is possible, but the answer lies in the fact that probate is a public proceeding. Anyone that is interested can access probate records to find out what took place.
These drawbacks are avoided when a Revocable Living Trust is used, because the trust administration process is not subject to probate and is administered privately.
A significant percentage of seniors become unable to make sound financial decisions at some point in time. There are many different underlying causes of incapacity, but Alzheimer’s disease is one of the leading culprits. It strikes around 40 percent of seniors that are 85 years of age and older. To account for this, if you establish a Revocable Living Trust, you could empower a disability trustee to administer the trust in the event of your incapacity.
A Will, by itself, only applies at death. There are no provisions in a Will that allows someone to manage an estate during a period of incapacity.
If you use a Will, you most likely allow for a lump sum distribution of the estate. This can be disconcerting if you have a beneficiary that is not good at handling money, is in the middle of a lawsuit, or is likely to get divorced in the future. You can account for all of these issues if you use a Revocable Living Trust. It would be possible to instruct the Trustee to distribute limited assets on an incremental basis to prolong the viability of the trust.
You can learn a lot more about Living Trusts and other estate planning strategies if you attend one of our upcoming Webinars. They are being offered free of charge, and you can click the following link to see the schedule: Reno, Nevada Estate Webinars. Or feel free to call our office at (775) 823-9455 to schedule a consultation.