A revocable trust, also known as a living trust, may be used to both avoid probate and manage a person’s property in the event of incapacity. A revocable trust is a written agreement indicating how a person wants the property that they have placed into the trust to be managed and distributed in the future. One who furnishes the assets for the creation of a trust is called the settlor. A living trust is created by the settlor’s reservation of the right to revoke the trust. The settlor also frequently reserves for life all the beneficial interests in the trust. The settlor can choose to be designated as trustee, and, in that event, they should also make provision for the appointment of a successor upon their death or earlier incapacity. Upon the settlor’s death, the trust becomes irrevocable, and the assets will be distributed accordingly to the trust’s terms. Assuming that the settlor has been able to convey all their assets into the trust, neither a will nor probate is necessary because the trustee, not the decedent, holds legal title to the property. Assets that were not transferred to the trust or some other nonprobate devise will be subject to probate.
How Could Probate Affect You?
Probate is the court procedure by which a will is proved to be valid or invalid and generally refers to the legal process wherein the estate of a decedent is administered. Generally, the probate process involves collecting a decedent’s assets, liquidating liabilities, paying necessary taxes and distributing property to heirs. These activities are carried out by the executor or administrator of the estate, usually under the supervision of the probate court. Avoidance of probate can be a major benefit of living trusts. By statute in most jurisdictions, including Indiana, both the attorney and the executor receive fees based on the percentage of the gross value of the estate. Additionally, the probate process can be time-consuming and typically takes a minimum of six to nine months. Multiyear estate administration proceedings are not uncommon. However, unless a living trust arrangement encounters unexpected challenges from disgruntled family members or difficulties with federal and state taxing authorities, fully funded trusts can generally be distributed to beneficiaries within three to four months.
The Advantages And Disadvantages
While living trusts offer many advantages to persons planning for their estates, they are not the most appropriate estate planning tool for all circumstances. While privacy is a major benefit of a living trust, the dark said of privacy can be inaction, abuse or malfeasance by a trustee. A successor trustee has complete access to trust assets. As such, a dishonest or misdirected individual can convert trust assets to his or her own use with relative ease. Also, when an ill or mentally incapacitated elder no longer serves as his own trustee, a child or other family member will often accept responsibility to serve as trustee. That trustee may discover monetary bequests in the living trust that surprise or upset him or her. Simply stated, this trustee may ignore the wishes of the settlor. The probate process makes such conduct difficult. Additionally, the tax benefit offered by a living trust arrangement depends on prompt and attentive action by the trustee. For example, the successor trustee must generally properly fund the credit shelter trust so as to obtain maximum protection from federal estate taxes. Finally, the cost of creating a living trust is typically greater than the cost of creating a will – or even two wills for a married couple. Additionally, all or most assets must be transferred into the living trust if benefits, such as ongoing management and probate avoidance, are to be obtained. Depending on the nature and size of the property to be transferred, this can be a time-consuming effort.
Contact Adam Decker To Learn More
Please contact Adam D. Decker, Attorney at Law, P.C. online or call the firm at 219-306-4837 to schedule an appointment to discuss your specific estate planning needs.