Many people want to leave behind inheritances for their loved ones after they pass away. Most have definitive ideas of which beneficiaries should be included in their estates and what each one should receive. Unfortunately, things don't always go as planned.
In those cases, benefactors' loved ones often face financial hardships, extensive court battles, and other hurdles before receiving their inheritances. Even then, the distribution of the estate in question may not play out as the deceased intended. Working with an estate planning attorney in Cullman can help dispel those problems.
Understanding the Problems with Probate
A growing number of people are realizing the importance of having a will. A will dictates a person's final wishes upon death. They detail the assets left behind by the testator or the person who creates the will. They also list beneficiaries and the inheritances they'll receive.
Many people are under the impression that a will is all they need to ensure their estates are doled out properly. They fail to realize that even with a will, their estates will need to go through a process known as probate before being divided among their beneficiaries. That process could take anywhere from a few months to a few years.
In the meantime, beneficiaries are often left without access to the assets listed in the will. That can include bank accounts, real estate, and other items. Despite being unable to touch those assets, they may still have to pay bills associated with them. Furthermore, the deceased's creditors may be able to place liens on the properties included in the estate or stake claims against the deceased's bank accounts.
Once the estate finally clears probate, there may be a great deal less left to beneficiaries than planned. Though creditors don't have any more access to the estate's assets than the beneficiaries, they could certainly be waiting in line to receive their shares once the probate process is over. On top of that, filing fees, court costs, and other expenses associated with probate can certainly add up.
Taking Probate out of the Equation with a Living Trust
Ideally, beneficiaries would be able to avoid the probate process entirely. That's not always an option, though. In truth, the only way to take probate out of the equation is to create a living trust. Trusts essentially serve as supplements to wills or alternatives to them. Having said that, legal experts advise against using a trust as a substitute for a will. Instead, it's best to use the two legal documents in tandem.
Living trusts are created while grantors are alive. They explain who the beneficiaries of an estate will be and how the estate should be divided up among them. When a grantor passes away, a trust hands over control of the estate to a trustee, who is a person designated by the grantor to handle the estate. From there, the trustee carries out the deceased's wishes as they're laid out in terms of the trust.
With a living trust in place, there's no need to go through the probate process. As such, the beneficiaries of the estate can receive immediate access to the assets therein. They can also avoid all the filing fees and other expenses generated during probate.
Different Types of Trusts
Though all trusts have a universal purpose, which is to dictate how a person's estate should be handled and divided among beneficiaries, not all trusts are the same. Two types of trusts exist: revocable and irrevocable. While the former can be changed over time, the latter can't.
Revocable trusts allow grantors to make changes as desired. Grantors can add assets to their estates or take them away. They can also add or remove beneficiaries, appoint alternate trustees, and make other modifications.
Perhaps the grantor acquires new properties or opens additional bank accounts while he or she is alive. If so, he or she can incorporate those assets into a revocable trust. In the event an appointed trustee or beneficiary passes away, the grantor can modify the trust accordingly.
In contrast, an irrevocable trust can't be altered. It's a set-in-stone document that dictates how a grantor's estate will be managed after his or her death. With an irrevocable trust, the grantor signs away his or her rights to the listed assets, turning them over to the trust itself. Starting out with a revocable trust and eventually transitioning to an irrevocable one is typically recommended.
Discussing Additional Benefits of Having a Living Trust
Living trusts provide an array of benefits. Avoiding probate is certainly one of the most significant. After all, forgoing the probate process can save beneficiaries a great deal of time, money, and grief. That's only one advantage to consider, though.
Providing for Loved Ones
Providing for loved ones' needs is undoubtedly a major benefit of creating a living trust. As noted, these documents pinpoint beneficiaries' of an estate. They also dictate how assets should be handled and when and how they'll be doled out among recipients.
With a living trust in place, there's less risk of a person's assets being granted to people they weren't meant for once he or she passes away. Trusts can also prevent the mismanagement of an estate. Assets included in a trust can be safeguarded against creditors as well, so beneficiaries don't have to worry about previous debts detracting from their inheritances.
Reducing Estate Taxes
Living trusts may also reduce estate taxes for beneficiaries. Placing certain assets in a trust makes them exempt from typical estate taxes. That could ultimately save beneficiaries a considerable amount of money.
Keep in mind, though, that's not the case with all assets. Placing some retirement accounts, insurance policies, and other resources into a trust may forfeit their existing tax incentives. Legal professionals can help grantors better understand the complexities of this aspect and aid them in making the right estate planning decisions.
Working with a Legal Professional to Take Full Advantage of a Living Trust
Estate planning can be complicated, and the laws surrounding inheritances tend to make matters even more confusing. Many grantors and their beneficiaries suffer as a result. Working with an attorney can go a long way toward guaranteeing both the grantor and his or her beneficiaries get the fullest benefit out of a trust. In turn, it ensures the trust fulfills its intended purposes.