Estate Planning – What’s Your Plan?
By Cathy A. Knecht, Esq., Knecht Law Offices, P.C.
When starting a business, one of the first decisions made is what type of business structure will be the best in order to protect your investment, your business assets, and provide the best model to successfully run your business. Your personal investments, assets, and family should be no different. Just as an LLC or a corporation protects your business, a Trust will protect your family.
A revocable living trust is a popular estate planning tool, allowing you to hold property in your own name for your beneficiaries to receive later. Property in trust does not pass through probate, saving time and expense for your heirs.
A Trust Avoids Probate- During your lifetime, you may transfer the majority of your assets into your trust, and appoint a trustee to carry out your wishes regarding the property contained therein. Assets held in the trust will be distributed per your instructions by your trustee without having to go through a lengthy court probate process.
A Trust Protects Your Heirs- Your heirs may be unable to adequately handle financial affairs. Perhaps you’ve left money to your children or grandchildren, but you wish to limit their access to the funds until they’re out of college; or perhaps you have always handled the household finances and your spouse would benefit from having the family assets managed by a trustee. A trust can achieve this purpose.
A Trust Helps You Avoid A Will Contest- A will contest is a situation in which someone challenges your will by attempting to prove that you were not competent to execute your will, or that you were being pressured or tricked into signing a will you didn’t really want. Although will contests are not common and usually unsuccessful, they can delay distribution of your estate. Further, your heirs might simply decide to settle the contest and give up part of their rightful inheritance just to save litigation costs and close the estate. While a will contest might tie up the distribution of your estate assets until the contest is resolved, a living trust becomes active upon your death, thereby allowing your trustee to distribute the trust assets to your chosen heirs regardless of any contest to the will.
A Trust Allows You To Transfer Real Property Located In Another State- A probate court in one state does not have authority over real estate located in another state. Therefore, if you own property in multiple states, such as a vacation home, your personal representative would have to file an ancillary legal action in each state where the property is located, creating further expense and delay in settling your estate. However, if you transfer your real estate holdings into a trust, your trustee can manage your real estate across state lines, avoiding going through probate in multiple states.
A Trust Protects Your Assets From Creditors and Lawsuits- Putting your assets in a properly structured trust may protect them from your creditors (although not always). It also protects your beneficiaries’, as their creditors may not touch the assets of a trust. If your beneficiary is in financial trouble, a bequest you leave may go directly to their creditors. But if you put the assets in a properly structured trust, it will prevent the beneficiary from borrowing against the trust, any trust income, and protects the trust’s assets.
A Trust Helps You Plan for Second or Subsequent Marriages- If you have children from a prior relationship or from more than one relationship, a trust will give you more control over who gets what from your estate. Not only can you employ a trust to control how much of your estate goes to your current children or step-children, but you can also control how much of your estate would go to any children your spouse may have after your death.
A Trust Helps You Insure Your Investments are Managed- When your estate goes through probate the assets therein might be temporarily frozen, having little or no active management until the process is completed. Plus the investments may be liquidated and distributed as cash. However, when you place your assets in a trust, your trustee can continuously manage your investments pursuant to the terms of the trust.