What are the Benefits of a Revocable Living Trusts
Post on 08-May-2015
DESCRIPTIONLet's look at some of the benefits of revocable living trust and how can trust be useful for people of ordinary means.
- 1.Let's Look at Some of the Benefits of Revocable Living Trusts and How Trust Can be Useful for People of Ordinary Means PAUL A. KRAFT Indiana Estate Planning Attorney WHAT ARE THE BENEFITS OF A REVOCABLE LIVING TRUST?
2. What Are the Benefits of a Revocable Living Trust? www.FrankKraft.com 2 There are people who assume that trusts are only for very wealthy families. This is really not the case. There are different types of trusts that serve different purposes. A revocable living trust is a type of trust that can be useful for people of ordinary means. Let's look at some of the benefits of revocable living trusts. PROBATE AVOIDANCE When you hold on to your personal property until the time of your death and arrange for its transfer through the terms of a last will, the estate must be probated before the heirs receive their inheritances. During probate the court determines the validity of the last will. If anyone wanted to challenge the will, arguments could be presented before this court. When you create a last will, you nominate an executor or personal representative. The executor handles the estate administration tasks. The probate court supervises the administration of the estate. There are a number of drawbacks that inherently come along with the probate process. For one, probate is a public proceeding. The records are available to the general public. Anyone who is interested could find out what went on during probate. This loss of privacy is disconcerting to many people. In addition to the loss of privacy, there are significant expenses that can accumulate during the probate process. The executor is entitled to payment for his or her time and effort. Final debts must be paid, including taxes, so there may be accounting fees. 3. What Are the Benefits of a Revocable Living Trust? www.FrankKraft.com 3 Because probate is a legal process, the executor will often bring in a probate lawyer, so there are legal expenses. Property must be inventoried and liquidated, so there could be appraisal and liquidation costs. There may be various incidental ad hoc expenses as well. All in all, a noticeable portion of the estate can be consumed during the probate process. The third drawback that we would like to highlight is the matter of time consumption. You probably would like your heirs to receive their inheritances in a timely fashion. This will not happen when probate is a factor. At minimum the probate process will take several months. There are some cases that take years. The heirs to the estate do not receive their inheritances while the estate is being probated. This time lag can present a significant problem for some people who may have been depending on the decedent for financial support. If you use a revocable living trust to arrange for the transfer of your monetary assets rather than a last will, the probate process will not come into play. When you create the trust you name a trustee. This can be a person that you know, but it could also be a professional fiduciary entity like the trust department of a bank or a trust company. You as the grantor of the trust create the trust agreement. The trustee will follow the terms of this agreement and distribute monetary resources to the 4. What Are the Benefits of a Revocable Living Trust? www.FrankKraft.com 4 beneficiary or beneficiaries after you pass away in accordance with your wishes. These distributions will not be subject to the process of probate. INCAPACITY PLANNING Another benefit that you derive from the creation of a revocable living trust is the ability to account for the possibility of incapacity. When you create the trust you can name a successor or disability trustee. This individual or entity would be empowered to administer the trust in the event of your incapacitation. Incapacity planning is quite important if you want to be prepared for all the eventualities of aging. There are various different causes of incapacity, but Alzheimer's disease alone is enough to make incapacity planning a must for serious minded individuals. Alzheimer's strikes with alarming frequency. Over 40 percent of people who are at least 85 suffer from the disease. If you create a revocable living trust, you can be certain that a financial decision-maker of your own choosing is at the ready to manage your resources if you become incapacitated at some point in time. 5. What Are the Benefits of a Revocable Living Trust? www.FrankKraft.com 5 CONCLUSION A revocable living trust is a powerful estate planning tool. With this type of trust you can facilitate the transfer of your financial assets to your heirs outside of the process of probate. Probate is a legal process that can be expensive and time-consuming, and there is no privacy when an estate goes through probate. When you create a revocable living trust, you can also account for the possibility of incapacity by naming a disability trustee. If you have detailed questions about the benefits of revocable living trusts, contact a licensed estate planning attorney to arrange for a consultation. Your attorney will answer your questions, evaluate your unique personal situation, and make recommendations. REFERENCES Investopedia http://www.investopedia.com/articles/pf/06/revocablelivingtrust.asp USA.gov http://www.usa.gov/topics/money/personal-finance/trusts.shtml 6. What Are the Benefits of a Revocable Living Trust? www.FrankKraft.com 6 About the Author Paul A. Kraft Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning. Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work. In addition to his practice, Mr. Kraft has lectured extensively in the areas of living trust planning, Medicaid planning, and presenting public and private seminars on the importance of proper estate planning. He has also authored various articles on estate planning and is a contributing author of LEGACY: Plan, Protect, and Preserve Your EstatePractical Answers from Americas Foremost Estate Planning Attorneys. Mr. Kraft is a co-founder of the Indiana Network of Estate Planning Professionals, a charter member of the AmericanAcademy of Estate Planning Attorneys and a founding member of the National Network of Estate Planning Attorneys. He is also a member of the Indianapolis Bar Association, including the Taxation, Business Law and Estate Planning sections; the Indiana State Bar Association, including the section on Taxation Law; the Indiana CPA Society; and the Estate Planning Council of Indianapolis. Mr. Kraft is admitted to practice law before the Supreme Court of Indiana, U.S. District Courts, and U.S. Tax Court. Frank & Kraft A Professional Corporation Attorneys at Law www.FrankKraft.com 135 N. Pennsylvania Street Suite 1100 Indianapolis, IN46204-2485 Phone: (317) 684-1100 Fax: (317) 684-6111