This is the second installment of a four-part series designed to address the estate planning questions we receive most often from our clients.
1. I have a Will, why would I want a Living Trust?
A Will is a good start, but may not be the best plan for you and your family. That is primarily because a will does not avoid probate when you die and must be validated by the court system before it can be enforced. Also, whereas a Will only goes into effect after you die, a Trust also provides protection if you become physically or mentally incapacitated. With a Trust, you – not the probate court system – control the distribution of your assets.
2. What is a Living Trust?
A living trust is a legal document that, just like a Will, contains your instructions for what you want to happen to your assets when you die. However, unlike a Will, a Living Trust may avoid probate at death, control all of your assets, and prevent the court from controlling your assets if you become incapacitated. We generally recommend a Trust for anyone who has minor children, owns a business, owns property in multiple states, or whose overall estate value is over – or close to – their local estate tax exemption.
3. What is probate and why do you want to avoid it?
Probate is the legal process through which the court sees that, subsequent to your passing, your debts are paid and your assets are distributed according to your Will. If you don’t have a valid Will, your assets are distributed according to state law. Probate can be expensive, time-consuming, and takes place in public view. Legal, executor, and court fees must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. Probate usually takes at least nine months often more than two years to conclude. During much of this time, your assets will be frozen and nothing can be distributed or sold without court and/or executor approval. If your beneficiaries need money to live on, they must request the court for a living allowance, which may be denied. Because probate is a public process, it may invite contests to your Will.
4. How does a Living Trust avoid probate and prevent court control of assets?
When you set up a Living Trust, you transfer assets from your name to the name of your trust, which you control. Legally, the trust owns your assets, so there is nothing for the courts to control when you die or become incapacitated. The concept is simple, but this is what keeps you and your family out of probate court.
For assistance with any legal needs related to your business or estate planning, contact Fournier Legal Services at email@example.com or 860.670.3535 now for a free consultation and planning session.
Joe received his law degree from the University of North Carolina–Chapel Hill School of Law and his Accounting degree from the University of Rhode Island. He is admitted to practice law in Connecticut, Massachusetts, and Rhode Island, and he is a CPA. He is an Adjunct Professor and lecturer at the University level and has been a frequent speaker on business planning and legal matters.