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What are the Benefits of the Living Trust?

21 September 2017 No Comment

Avoiding Probate. The primary reason for having a living trust is to avoid probate. Every will must go through a process called “probate.” Probate means your will must be authenticated by a court and an executor must be appointed to collect your assets, pay your creditors, and transfer of your property to the beneficiaries under your will. The probate process results in attorney and court fees and some delay. By contrast, a living trust does not go through probate, allowing assets to be distributed immediately by the designated trustee according to your instructions, saving substantial fees. A living trust can avoid these extra court proceedings, substantially reduce probate fees and make it easier on your family/beneficiaries during a stressful time.

If you die owning real estate outside the state where you live, the living trust’s probate avoidance benefits are magnified. For instance, if you were to own real estate in several states, there would generally need to be some type of court proceeding in each state. If the property is transferred to a living trust, the necessity for probate in these multiple jurisdictions is avoided.

Avoiding Appointment of a Guardian Ad Litem. If a minor (i.e. someone under the age of 18) is an heir at law, the Surrogate’s Court will appoint a Guardian Ad Litem to protect the interests of the minor. This adds to the expense of the administration of the estate. Use of a Revocable Trust avoids this.

Avoiding Guardianship Should You Become Disabled. Guardianship is the legal process for management of your property and providing for your personal needs when you become disabled or incapacitated. Declaring a person incompetent and having a guardian appointed is a long, expensive, and, in many cases, embarrassing process. In addition, after the guardian has been appointed, he/she will be required to file annual accountings, which are expensive and will be paid from the assets of the incapacitated person.

Perhaps, one of the most practical reasons for having a living trust is to provide for the possibility of your disability. If all of your property is held in a living trust and you become disabled, a successor trustee (whom you have named to be appointed in the trust document) can step in and manage your property for your benefit in accordance with the terms of your trust. This avoids, in most cases, the need to have a conservator appointed by the court to manage your affairs. While most states provide for durable powers of attorney, a much less costly alternative to a guardianship, many title companies, banks, and other institutions are reluctant to accept durable powers of attorney, especially those that only become effective upon the person’s disability.

Avoiding Losses Due to Delays in Probate. One problem that immediately confronts an attorney on the death of a client is that stocks and bonds registered in the client’s name cannot be sold until probate of the will and issuance of letters giving the executor authority to act. As we have seen in recent years, the ability to sell securities quickly can be critical. Even in the best of circumstances, probate takes time and requires information and signatures by family members at a time when the family may not want to focus on such issues. By contrast, if securities accounts are held in a living trust, the trustee can make investment decisions immediately.

Privacy. Another advantage to using a living trust rather than a will is it avoids the public disclosure of the amount, value, and disposition of your property. Probate and administration is a matter of public record, meaning that any person is free to examine all of the papers filed with the court and attend the hearings held at the various stages of the probate process. Because the court has no jurisdiction over assets held in the living trust, they are not included in the probate file. Your trust assets are quietly distributed by the successor trustee to the beneficiaries you named.

Possibly Reducing the Probability of a Will Contest. By putting all your assets into a living trust, probate can be avoided and with it the requirement that parties be served and informed of their right to contest. This reduces the number of possible lawsuits simply because most people do not think about challenging your estate plan unless they are given notice of their right to do so. One practical advantage to a living trust in adversarial situations is that the trustee will have control of the assets during the course of the litigation. This would not be the case if the assets were held in your individual name.

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