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Living trust - Estate planning Control - Avoid Probate Problems - Joint Tenancy Ownership Problems - Beneficiary Arrangement |
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Living trust - Estate planning - Incapacitation Problems - good family estate planning tool to avoid probate - identify the rightful heirs to the estate - Living trust agreement |
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Get Control of Your Estate While You Can
A revocable living trust can solve many of the problems encountered in estate planning. Listed below are some of the situations helped by careful estate planning.
Probate Problems. Probate is the system used by the state to deal with your estate. Two main functions of probate are to identify the rightful heirs to the estate and the share size that each heir will receive, and to replace your name with that of your heirs on the legal title of the property. Assuming you don�t have any kind of revocable living trust arrangements, but you do have a will, the state will be able to determine your rightful heirs and the portion of your estate each will receive. If you don�t have even a will, the state will decide on who and what portion each heir will receive, using its own procedures. Unfortunately, after you are gone, the only way your property ownership can be re-titled is through court probate procedures and supervision.
Try to avoid probate because it can be a time-consuming and expensive process for your heirs. Probate costs can eat away one-tenth of your estate, even a small estate. This creates a burden for your heirs and an emotional drain as well. Sometimes probate leads to litigation that can result in family battles and even disregard your wishes entirely. Probate is also a public event and prevents your family from keeping its business private. Furthermore, it can continue for years and not provide the emotional and financial relief you would like to leave behind you at a time when it would be the most helpful to those you care for.
A revocable living trust is one good family estate planning tool to avoid probate. A revocable living trust avoids probate by turning over the title of your property to the revocable living trust before your death. The revocable living trust is considered to be the legal owner of the property for title transfer purposes, but you have complete control of the property during your life. When you die, the trustee that you selected during your lifetime will arrange for the transfer or payment to your heirs that you specified in the revocable living trust. As you will see later, you have a great deal of flexibility in specifying the details of these payments and transfers. One great thing about a revocable living trust is that after your death the trustee can handle everything quickly and simply without lawyers, excessive costs, delays, or court supervision.
Joint Tenancy Ownership Problems. Married couples and parent-child combinations sometimes choose joint tenancy with rights of survivorship as their method of holding title to both real estate and financial assets. In this method, when one joint owner dies, the surviving joint owner or owners will automatically receive your interest in the property without probate. This technique avoids probate.
It does have some possible problems, however.
One problem is that you and your joint tenant are mutually responsible for each other�s liabilities and if your other half incurs a judgment or tax lien, you can lose your property as well. Or, if your joint tenant is your child, should that child divorce, the spouse may get your property in the divorce settlement. Furthermore, when you die and leave your assets to your surviving spouse through joint tenancy, your spouse may give away your property to a new souse or lover and leave your children or other heirs with nothing from your estate.
It is also possible that probate will not be avoided upon the death of your joint tenant spouse because that person has not done any estate planning to avoid probate.
A revocable living trust is one of the best ways to hold property title, because it can avoid all of the problems mentioned above.
Beneficiary Arrangement Problems. Many assets may be transferred to heirs quite well with beneficiary arrangements. For example, beneficiaries may be specified on pension plans, insurance policies, annuities, bank and investment accounts. When the original owner dies, the remainder amounts or death benefit will be paid quickly to the named beneficiaries, in the amounts specified to each beneficiary and without probate. There are some problems and limitations with this system.
For instance, it isn�t possible to provide for beneficiaries who become incapable of handling their financial affairs. Also, payments to the beneficiaries with most beneficiary arrangements cannot be timed or controlled, so immature beneficiaries can waste their inheritances. Beneficiary distributions will be subject to the lawsuits, liens, bankruptcies and divorce problems of the beneficiary. Also problems arise when the beneficiary dies before the original owner. For instance, the money may be paid to the spouse of the beneficiary, rather than held for or paid to the beneficiary�s children).
Incapacitation Problems. Since an incapacitated owner is not capable of conveying title or signing legally binding documents, when a property owner has either sole or joint tenancy ownership and then becomes mentally incapacitated, the property is in a legally indeterminate state. In order to sell or even to lease the property, it is often necessary to obtain an expensive and time delaying court conservatorship procedure. A revocable living trust is the most comprehensive manner to deal with incapacitation issues. A simple device known as a durable power of attorney may also take care of the problem in some cases.
A revocable living trust may provide asset protection from divorce, lawsuits and judgments as well as solving the above problems. It is often used for the purpose of asset protection.
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