The benefit of trusts in estate planning is primarily a question of state law, according to The Houston Chronicle in “Elder Law: Which should I have—A Living trust or a will?”
In some states, probate is not an expensive or overly time-consuming issue. Texas, for example, has what is called an independent administration. Executors handle the tasks involved in settling an estate and distributing assets to beneficiaries. As a result, there’s very little court involvement. However, that’s not the case everywhere. An estate planning attorney in your area will be able to explain the details of your state’s procedures and discuss whether a trust is right for your estate. They’ll also explain the difference between different types of trusts.
The trust most frequently used to avoid probate, is known as a revocable management trust, living trust or an “inter vivos” trust.
Selecting the best type of trust for each situation is different. Here are some advantages of living trusts:
Avoiding probate. The cost of probate alone is oftentimes reason enough to use a trust. An additional benefit is that a trust can help keep your asset list private, by ensuring that it is only seen by beneficiaries.
Asset management for incapacity. A living trust goes into effect, while you are alive. If you become incapacitated, an alternate trustee can step in to manage assets, pay bills and ensure that finances are taken care of.
Avoiding probate in another state. If you own out-of-state property, your estate may need to be probated in your home state and in the other state. If you have a living trust, out-of-state parcels of land can be deeded into the trust during your lifetime, thus avoiding the need for probate in another state. After your passing, your trustee can handle the out-of-state property in the living trust.
Administrative ease. There are, unfortunately, instances when Power of Attorney can be challenged by financial institutions. The authority of a trustee is more likely to be recognized, by banks, investment companies, etc.
There are some questions about whether it’s better to have a living trust or a will. The most complex part of having a living trust, is the process of funding the trust. It is imperative for the trust to work, that every asset you own is either transferred into the trust or re-titled into the name of the trust. If assets are left out or incorrectly funded, then probate will probably be necessary. This can occur, even if only one single asset is left out.
Funding the trust becomes complicated, when retirement accounts are involved. Consult with an experienced estate planning attorney, if you want to make a trust a designated beneficiary of a retirement account. This is because very specific and complex rules govern the ability to “stretch” the distributions form the account.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.
For more information visit my Wichita KS Estate Planning Attorney website
Reference: The Houston Chronicle (Feb. 15, 2019) “Elder Law: Which should I have—A Living trust or a will?”