Think you don’t have enough money to consider using trusts in your estate plan? Think again. Experts say that trusts are applicable for a variety of clients. In fact, the amount of money in your bank account rarely disqualifies you from effectively using trusts to distribute your wealth after your death. Today, we are going to consider the fundamental characteristics of revocable and living trusts to help you understand how trust administrationcan help you with your probate needs.
The primary purpose of using a living trust is to avoid probate and the associated court costs. Probate is simply defined as the transfer of a decedent’s assets. This can be accomplished through a will or by following state statutes in the absence of an estate plan. Most of the time, probate is a smooth transition with few hiccups. Sometimes, though, wills can be stalled in probate for an extended time. This is generally due to heirs that choose to contest the will; as a result, the estate plan can potentially be held up in probate court for years.
Using a living trust to avoid probate requires that the grantor, or owner of the trust, fund it with the majority of his or her personal assets. In essence, this allows the grantor to avoid actually “owning” anything; the trust itself is the owner of those possessions. The grantor is able to access the trust assets for the remainder of his or her lifetime, but the possessions are formally owned by the trust, allowing the person to die without any property.
It is important to remember that living trusts can cost two to three times the amount required to create a will. This investment can pay off in the long term, however, since those who choose trusts are essentially planning their own probate while they are still alive. Ultimately, a trust can protect your estate plan from being contested by relatives or other interested parties, ensuring that your assets are transferred to your chosen beneficiaries.
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