Many people are under the impression that a last will is the most simple and efficient estate planning tool. They assume that trusts are only useful for very wealthy individuals that have complex inheritance planning concerns.
In reality, the administration of a will is actually quite complicated. However, you can create a type of trust that benefits people who are not among the financial elite.
Probate Process
When it comes to the complications, the process of probate is the culprit. If you were to create a last will, you would be the testator. You would also name an administrator in the document. This person, an executor or personal representative, would be charged with the estate administration tasks after you pass away.
Many people assume that the executor can follow the instructions that are in the will and distribute the assets to the inheritors directly. In fact, the laws do not allow the representative to act independently. The will would be admitted to probate, and the probate court would provide supervision during the estate administration process.
During probate, your executor would notify your creditors, and they would be given some time to come forward to receive payment. All the property that comprised the estate would be identified and inventoried, and it would ultimately be prepared for distribution to the heirs that are named in the last will.
This can include the need for appraisals and liquidation of property. It is not always simple to get fair value for property overnight, so this can be a lengthy process in some cases.
In addition to the time lag, there are some considerable expenses that can accumulate during the probate process.
The executor or personal representative is entitled to payment for his or her time and effort, and there are going to be legal fees if a probate lawyer is brought in to assist the executor. There are filing fees, and there can be expenses that go along with the appraisal and liquidation process. This red ink is going to reduce the inheritances that are eventually received by the heirs.
The Spendthrift Factor
These drawbacks are considerable, and there is another major factor that a lot of people do not think about. You may have someone on your inheritance list that is not a very good money manager. This individual may come to you frequently looking for financial assistance.
It can be disconcerting to leave a spendthrift family member a lump sum inheritance because they could use up the inheritance quickly. A simple last will without any testamentary additions would facilitate a lump sum distribution.
Revocable Living Trusts
If these pitfalls do not sound very appealing to you, there is a viable alternative in the form of a revocable living trust. Assets in the trust would be distributed outside of probate, so the negatives would be avoided.
You don’t have to worry about losing control of the assets if you establish a living trust, because you could, in fact, revoke or dissolve the trust at any time if you choose to do so.
However, the point of the creation of the trust is to serve as an estate planning vehicle. Therefore, it is unlikely that you would ever want to revoke it. While you are alive, you could act as the trustee and the beneficiary, so your control would be absolute even while the trust is intact.
If you have an heir that could be described as a spendthrift, you could instruct your attorney to include specific verbiage in the trust agreement with regard to the nature of the asset distributions.
For example, you could allow for monthly distributions of $4,000 for an open-ended period of time. It would also be possible to provide larger distributions when the beneficiary reaches a certain age. In this manner, the viability of the trust could be prolonged.
Plus, through the inclusion of a spendthrift clause, the beneficiary and the beneficiary’s creditors would have no access to the principal. This adds another layer of protection.
Schedule a Consultation!
As you can see, you can take steps to accomplish specific, targeted estate planning goals. By seeking legal assistance, you can learn of all the options available.
If you’re ready to work with an OKC estate planning lawyer, call us at 405-843-6100 to schedule an appointment. There is also a contact form on this site you can use to send us a message.
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