The emotional toll of coping with the death of a relative is challenging enough on its own. But when an individual dies without fully wrapping up their affairs, the grieving process is often compounded by legal obstacles at a time when their surviving relations are least equipped to deal with them.
Many questions may arise as you think about putting your estate in order. What happens if you leave behind a large estate and several relatives arise from the woodwork to dispute the will? If you live in New York but own property in Florida as well, will your decedents be stuck hiring separate lawyers to deal with the out-of-state issues? What if minors are involved?
Ultimately, how can you avoid leaving your loved ones with a legal, financial, and emotional morass upon your death?
A valuable estate planning tool known as a revocable living trust, or a trust created during your lifetime, may be the answer. A living trust is effective immediately, but can be changed at any point before your death.
Why is a trust such a potentially attractive solution? A trust can help avoid living probate in the event of disability and allows you to avoid probate, upon your passing. Many people mistakenly believe that having a will allows you to avoid probate. That is not the case. A will simply replaces the state’s default of “intestacy” with your preferred recipients.
Probate is a potentially lengthy, drawn-out proceeding that those dealing with the death of a loved one would most likely prefer to avoid. Taking steps to prevent it will save time and expenses, decrease exposure, and, perhaps most importantly, allow surviving relatives to move on emotionally.
How can you use this knowledge to your advantage? Because a trust provides for a designated beneficiary upon the grantor’s death, the courts don’t need to intervene. For many, this is a welcome alternative.
How do you know if a trust is right for you? Everyone’s situation is different, but there are several common circumstances that make setting up a trust an ideal way to put their affairs in order.
- If due to age or poor health you fear that you won’t be able to manage your own affairs, a revocable living trust will let you choose someone to manage your estate as you would want them to be.
- If you’re worried about your heirs arguing over your property, a trust will make it harder for your decedents to disregard your wishes.
- If you wish to leave property to heirs who will be unable to govern their own affairs—such as an adult child who is mentally disabled —a trust allows you to provide for them while still asserting control over how the money will be dispensed.
- If you wish to protect your children’s inheritance in the event of divorce.
- If you wish to leave assets to heirs and provide creditor protection.
- If you wish to avoid loss of assets due to blended families.
- If you own real estate in other states, a living trust will make things easier. However, it’s imperative to remember that you must retitle that property in the name of the trust. If you fail to do so, you will still have to go through probate for the property in that particular state–an ordeal that may rack up unnecessary and easily avoided expenses for your decedents at a particularly trying time.
- If you have minor children who you want to provide for, a trust may be useful. Because children are not legally permitted to hold property, anything inherited by a minor will be entrusted to a guardian until the child turns 18. But what if you’re concerned that the courts will appoint a guardian who doesn’t have the child’s best interests? A trust gives you more power over the situation by letting you designate the terms and the trustee(s), rather than simply putting your faith in the courts.
Above all, a trust gives you more options when it comes to estate planning and may ease the burden on your loved ones at a time when they need it most.
This piece also appeared in Senior Outlook Today, April 12, 2013.