If a living trust is the centerpiece of your estate plan, you act as the trustee while you are alive and well. There is no loss of control of the assets, and you retain the right of revocation.
As part of your estate plan, your trust allows you to direct the actions that must be taken after you pass away. To this end, you name a successor trustee to assume the trust duties after your death, and you name your beneficiaries.
We will share some tips with regard to the trustee selection process, but before we get there, we will briefly explain the benefits of living trusts.
Living Trust Advantages
A lot of people assume that a will is the ideal estate planning device unless you are very wealthy because the administration process is simple. In reality, this is a misconception.
When a will forms the estate plan, it must be admitted to probate after the passing of the testator. This is a legal process that takes place under the supervision of a court. The executor handles the tasks that must be completed, and the court presides over the process.
You probably want your loved ones to receive their inheritance in a timely manner after your passing. However, this does not often happen when an estate is subject to probate.
In most jurisdictions, the process takes a minimum of nine months. No property is distributed while the estate is in probate. In addition, probate is a public proceeding and anyone can access the records, diminishing privacy.
This process also often expensive. There is a filing fee, and the executor is entitled to remuneration. The executor may need to hire a tax accountant and a probate lawyer, and there might be appraisals and liquidation expenses.
These drawbacks come together to paint a rather unpleasant picture. However, probate can be easily avoided. Through a living trust, the successor trustee distributes the assets to the beneficiaries outside of probate, so there is no court involvement.
In addition, you can include spendthrift protections when you have a living trust. This protects the principal from creditors of the beneficiaries, and may instruct the trustee to distribute limited assets over an extended period of time.
Since the trust owns the assets of the estate, the asset identification and preparation process is streamlined.
Any adult that is willing to assume the role may be appointed as the trustee, and the situation dictates the best course of action. For example, your spouse might be the successor trustee of a living trust, and she can also be a beneficiary.
Other family members, named as beneficiaries, may also be named as alternate trustees. Ultimately, you must ensure that the person you choose is fair, competent, and judicious.
In addition, trust companies and some banks provide trustee services for a fee. This may be a good choice if the trust will provide small distributions over time.
While not pleasant to discuss, elders commonly become incapacitated in some way. For example, over 30 percent of people that are 85 years of age and older have Alzheimer’s disease. To account for this possibility, you may name a disability trustee in a living trust. This may be the same individual or entity that will act as the successor trustee.
We Are Here to Help!
If you name someone in your family to act as trustee, he/she will invariably have certain questions. When you work with our firm to create your trust, we are available to provide that assistance when necessary.
You can schedule a consultation at our Oklahoma City estate planning office if you call us at 405-843-6100, or use our contact form if you would prefer to send us a message.
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