Many people who are interested in a plan to transfer their financial legacy to loved ones, but they do not understand the best strategy to achieve this goal given tax consequences, privacy concerns, financial planning for kids and other objectives. While some people use a will to facilitate the efficient transfer of their assets and money to family, friends and charities, a revocable living trust can be a better option depending on your circumstances. Wichita estate planning attorney J. Joseph Weber has provided highlights of some distinctions between a will and a revocable living trust.
If you use a will as your primary means of transferring your estate to your heirs, the will must go through the probate process. The probate process involves conducting an inventory of estate assets and paying of estate debts and taxes before the net proceeds of the estates can be distributed to your beneficiaries. This delay in the distribution of your legacy can create financial hardships for your loved ones. While the probate proceedings are pending, which will typically take months or longer, your family might not have access to assets and funds to make mortgage payments, utilities, car payments and other monthly expenses.
By contrast, a revocable living trust does not need to go through probate. Although trusts can take many forms, the basic design of a revocable living trust involves three basic parties. The “creator” of the trust is the person who wishes to transfer assets to beneficiaries. The person who creates the trust can continue to manage the assets in the trust or delegate this responsibility to another person who serves at the “trustee” during the life of the trust creator. When the trustee passes away, the assets that have been transferred into the estate can be transferred to the beneficiaries without the need for probate.
Because a revocable living trust does not need to go through probate, there are other benefits of this approach to transferring your legacy. Privacy is another distinct advantage of avoiding probate. The probate process is a public proceeding, so personal and sensitive information about your finances, assets, debts and other private information is disclosed to the general public. The terms of a revocable living trust permit the trust creator to keep information about the nature of his or her assets and distribution of those assets private from both the public and even the beneficiaries of the trust.
Another important benefit that a revocable living trust provides is flexibility in management and control of your legacy. During your lifetime, you can use this form of estate planning tool to continue management and control of your assets. A revocable living trust also permits you to use tools like a spendthrift trust and other trust arrangements to protect beneficiaries that are mentally disabled or financially irresponsible. A revocable trust can even be dissolved or modified during your lifetime. While a will permits the transfer of assets to your family and loved ones when you pass, it does not provide a tool for managing and controlling those assets once they are distributed to your heirs.
Depending on the specific facts and circumstances, a living trust also might permit a more significant amount of your legacy to be preserved for your loved ones. Although a living trust might be more expensive to initially set up, the cost of probate typically is more expensive than a trust arrangement because of potential exposure to additional tax burdens, probate administration fees and other expenses associated with the probate process.
There are many types of living trusts and wills, so your unique circumstances will determine the best estate planning tool to fit your situation. If you have questions about legacy succession, you should talk to an experienced Kansas estate planning lawyer. Because every situation is unique, we invite you to contact us if you have specific questions. We invite you to call us at (316) 265-7802 or submit an inquiry form through this website to schedule your initial consultation.