| Much has been brought to light with the death of Prince who died in testate. Even if you have a will, it may be worth exploring whether a revocable living trust can help you and your family.|
If you already have a will to spell out how you want your assets to be managed after your death, then you’re more prepared than most. Incredibly, 66% of Americans don’t have a will.
But even if you have a will and think your financial situation is pretty standard, there’s another question you should be asking: “Do I need a trust?” You might be surprised. A Revocable Living Trust can be a useful estate planning tool for people at all income levels, not just for the very rich, says Kathleen Selinger, Wealth Planning Strategist for Wells Fargo Advisors.
Knowing the basics: It depends on your individual circumstances, but most people should at least consider a revocable living trust. People think trusts are just a tool to avoid estate taxes, but they have a lot of other advantages.
While most people know the basics of why they need a will – to help avoid controversy around your estate – one thing that may keep people from setting up a trust is a lack of understanding of how it works. You set up a trust while you are alive, and then transfer your property and other assets into the trust. Most people name themselves as the trustee – the person who manages the assets within the trust – but you can also choose someone else or an institution to be the trustee. If you are serving as trustee, you’ll also need to name a successor trustee to distribute your assets upon your death.
A properly created living trust may be more expensive to set up than a simple will, but it gives you greater control over when and how your assets will be distributed after your death. For example, you can set it up so that your assets will be distributed over time to your beneficiaries, in amounts that you specify.
(1) Avoid probate – Probate is the process the court systems use to distribute your assets according to the terms of your will. In many states, probate is costly and time consuming. Even if you have no debt, the courts give creditors a certain amount of time to come forward and make a claim on the assets. So it can be a while before beneficiaries get your assets. If you have a trust, you avoid the fees and delays associated with probate.
(2) Privacy protection – Because probate is a public process, anyone can go to the courthouse and see the details of your will. A living trust will keep the terms of your estate secret from disappointed relatives and curious friends or neighbors.
(3) Built-in incapacity planning – With Americans living longer, there’s a greater chance you may become incapacitated during your lifetime. If you have a financial durable power of attorney, you have already named someone to take over your affairs in the event you become incapacitated, but it can be difficult for an agent named under a POA to step in and handle your financial matters for a variety of reasons. In contrast, with a revocable living trust, successor trustees seem to have an easier time having his or her powers recognized by financial institutions. However, if you do have a revocable living trust, it is still advisable to have a POA as well. A successor trustee only has power to manage trust assets.
The importance of a will: If you have a simple estate, don’t have a lot of assets, and live in a state that doesn’t have a lengthy or complicated probate process, a simple will may be all you need. But, always consult with a qualified estate planning attorney first. Some questions to ask: Is probate a problem in my state? Do my assets justify the extra expense of a trust? Is my financial POA sufficient if I become incapacitated?
One final note from Selinger . If you do decide to have an attorney create a revocable living trust for you, make sure you discuss with your attorney how to put assets into the trust, otherwise those assets may still be subjected to the probate process.