5 Things a Revocable Trust Can Do That Cannot Be Done With a Will
A trust is an excellent method for directing how your assets are distributed after you have passed away and it gives you and your beneficiaries advantages that do not exist if you only have a will or do not make any plans. Typically a will is in probate for a year or so and towards the very end of the case, the property is distributed to the heirs, who then get to do what they want with their inheritance.
You can Extend the Distribution of Assets Longer
However, if you have prepared a Revocable Living Trust, you can direct exactly how and when your assets are distributed. If you create a plan when your children are minors, you can provide for their upbringing and lifestyle while they are children and into their adult years, in order to prevent them from inheriting everything when they reach 18 years old. You can use the trust to encourage your children to attend college or a vocational training program before they can inherit the remaining assets. This way you can make sure that your money goes to pay for an education as opposed to whatever young adults prefer to spend their money on.
You do not need even need to distribute the assets at college graduation if you’d like to maintain further control or if you need to maintain control for their own good. The maintenance of your assets in the trust is also useful if your child has a substance abuse or gambling problem. You can stagger the distributions or keep the assets in trust for your child’s lifetime. The time frame is within your control, which is not the case with a will or if you decide to not plan.
Trust Administration is Faster
If your Revocable Living Trust is a fairly straight forward plan where your beneficiaries get their entire distribution in one payment, the trust administration is much faster than a probate. While a simple probate case is Southern California is taking upwards of one year before it is completed, a basic trust can be distributed in a little more than 120 days. The time period of 120 days is due to the California law that requires every beneficiary of the trust and every heir-at-law be given written notice of the existence of the trust so they do have an opportunity to make a claim within the 120-day period.
Trusts are Private While Probate is Public
Since a trustee is not required to file a probate case to distribute your assets at the time of your death, your affairs stay private and your loved ones do not have to go to court. If you have only prepared a will or have not planned at all, then a court case is opened and an inventory of all of your assets becomes part of the court record. Court records are publicly available to anyone willing to pay the fee to make a copy. Not only are your assets listed, but all of your beneficiary's names and addresses are made part of the public record and the fact that a probate case has been opened must be published in the local newspapers for at least three weeks. By then every creditor and inheritance lender is soliciting business from your executor and your beneficiaries.
Get Asset Protection for your heirs
While you continue to keep your assets inside a trust, you can also help provide your beneficiaries with some asset protection, that is, protecting their inheritance from their spouse and creditors. This type of planning is more complicated and requires a person other than your beneficiaries to be in control of the trust assets but it could be a useful tool to the right type of beneficiary. If your child owes money to creditors, their inheritance could be easily reached by the creditors if your beneficiary gets a lump sum payment. If you do not want to see your nest egg get lost in a divorce between your child and their soon to be ex-spouse, this could also be a useful tool.
Retain and Maintain Family Property
If you have a valuable, yet sentimental asset, like a cherished vacation home, you could prevent its sale upon your passing away by keeping it in a trust. If you want to prevent your children from squabbling about the sale of the property, you could set out specific terms for the maintenance and eventual sale of the property, delaying it for decades or even farther out.
Trusts Avoid Probate
The main selling point of a trust still remains its ability to avoid probate. Why do you want to avoid probate? Because probate avoidance saves your estate money. Are you wondering how much money I am talking about here? Well, it depends on the value of your estate. It depends on the gross value of the estate on the date of death because the mortgages and other liens on assets are not used to determine the value of the estate.
California law has a formula for determining the amount of attorney’s fees and executor’s fees. The executor’s and the attorney each get to take as their fee the following percentages: 4% of the first $100,000; 3% of the next $100,000; 2% of the next $800,000; 1% of the next $9 million and so on. So if you leave behind an estate that is worth $1 million, your executor will earn a fee of $23,000 and the attorney will also earn $23,000. And these costs do not cover court fees, publication fees, the cost of a bond, and other costs. Your estate can truly save tens of thousands of dollars with your advance planning.
If you are interested in protecting your loved ones by creating an estate plan, you can contact Shawna Murray Law at 949-416-3575.
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