The process of estate planning involves taking inventory, not only of your wealth, but also of your needs and desires. Whether or not a particular planning technique makes sense for you may depend, in whole or in part, on whether your estate planning objectives do or do not include certain goals, as well as whether your estate does or does not include certain risk factors. Carefully assessing all of these things is an important early step in the process of reaching a well-thought out estate plan.
For many people, avoiding the probate process, with its potentially large fees and consumption of time, is a central objective. For a lot of those people, a revocable living trust may represent a viable way of leaving a legacy, providing for your loved ones and escaping the lost time and money that comes with going through probate administration. Depending on the makeup of your estate and the laws of your state, you may have other options in addition to living trusts that may allow you to avoid the probate process. In some states, the laws regarding death beneficiary designations have been broadened to the point that you may be able to transfer most or all of your wealth using pay-on-death or transfer-on-death techniques. In some cases, though, a living trust may still provide you with valuable benefits even though your state allows you to transfer your assets using death beneficiary designations.
Another objective some people have is asset protection. These people want to have the peace of mind that their money will pass to their loved ones, not their creditors. Implementing certain types of irrevocable trusts may protect your assets in some situations.
In the past, people with issues regarding creditors have avoided creating living trusts because they were less advantageous than probate when it can to putting creditors “on the clock” to make a claim for payment. The executor of an asset must give notice to all of a deceased person’s creditors and then, once that notice is sent, the creditor only has a few months to demand payment. If that period passes before the creditor acts, the creditor forfeits that claim forever. With living trusts, the creditor’s time period to act could be two years or more.
Today, though, in some states, the trustee of a living trust has the option to serve notice on creditors when a trustor dies. Submitting this optional notice to creditors subjects them to the same limited time-period as a creditor who received notice from a probate estate’s executor. This way, you can have both the asset protection of a limited time period for creditor action, as well as the probate-avoidance and other benefits that come with a living trust.
All of this is meant to highlight the multitude of options that exist for your estate plan, in order to ensure that your plan best fits your needs and goals. The key, of course, is to take that first step and being putting your plan in place right away.
Summary: Estate plans can be customized to meet a variety of different desires and objectives. Your plan may include revocable trusts, irrevocable trusts death beneficiary designation ownership techniques, or a combination of tools. Whether you seek to avoid probate, protect your estate against creditors or achieve other goals, a well-thought out plan can get you to the outcome you seek.