Far too many people are remiss when it comes to estate planning. Unfortunately, the lack of action will often yield negative results when families are left behind to manage on their own. This is something that we see all too often, and the inaction is quite unfortunate because some simple advance planning can make all the difference.
It is important to discuss asset transfer methods with an inheritance planning attorney because there is no one-size-fits-all estate plan. The ideal way to proceed will depend upon the circumstances. However, as a layperson, you would have no reason to know why a particular course of action would be preferable given the circumstances.
In this post, we will take a general look at the three commonly used asset transfer methods so that you have a basic foundation of information to draw from going forward.
Last Wills
One reason why people put the matter of estate planning on the back burner is because they think that it all boils down to the creation of a last will that can be quickly created at any time. There are a number of different big-time flaws in this overly simplistic point of view.
The first thing you should know is that there are a few different elements to the estate planning equation. Yes, you have to state your wishes in writing, but what happens immediately after you pass away? Do you want to leave lump sum inheritances to everyone on your list with no protections or restraints?
Estate administration is an important piece to the puzzle. The executor named in a will would be required to admit the document to probate, and the court would provide supervision. This process is not inherently negative, but it does add a layer of complexity, and it can be rather time-consuming and expensive.
The assets would not be consolidated under any definable umbrella as it were so the executor would have to identify and inventory all the resources. This is one of the reasons why the probate process doesn’t run its course in a matter of a few weeks or even a couple of months.
With a last will, you have some limitations with regard to the way that you can arrange for postmortem asset transfers. Broadly speaking, the estate administration process would be complete after the court has closed the estate. There would be no mechanism in place to provide ongoing administration, and this is why inheritors would typically receive their bequests all at once.
Revocable Living Trusts
A commonly embraced alternative to a last will is a revocable living trust. This estate planning device provides more flexibility and efficiency.
You can in fact revoke or dissolve it at any time, and you can revise the terms so you are not stuck with the decision if you ever change your mind. Plus, you can act as the trustee and the beneficiary while you are alive and well. The “and well” part is relevant because incapacity eventually strikes many elders. In the trust declaration, you can name a disability trustee to manage the trust if you ever become unable to do so yourself.
This incapacity planning component is one of the benefits, and another one is the avoidance of probate. You name a successor trustee in the trust agreement, and you name your heirs as the beneficiaries. After you are gone, the trustee would distribute assets to the beneficiaries in accordance with your wishes outside of probate.
If you have concerns about the money management capabilities of a beneficiary, you could include a spendthrift clause. This would protect the assets from creditors, and it would keep the principal out of the hands of the beneficiary. You could instruct the trustee to distribute assets to this beneficiary on an incremental basis to prolong the viability of the trust.
Irrevocable Trusts
In addition to the revocable living trust, there are also trusts that cannot be revoked. If you surrender incidents of ownership by conveying assets into an irrevocable trust, they would not be part of your estate for tax purposes. They would also be out of your name if you were to apply for Medicaid to pay for nursing home care.
These are a couple of the reasons why some people use irrevocable trusts, but there are others, including special needs planning that can preserve government benefit eligibility for people with disabilities.
Schedule a Consultation Today!
If you would like to discuss your estate planning objectives with a licensed attorney, our doors are open. You can schedule an appointment at our North Carolina office if you give us a call at 704-944-3245 (Charlotte, NC and Huntersville, NC). Our number in Kentucky is 606-324-5516 (Ashland, KY) or 859-372-6655 (Florence, KY), and you can send us a message through our contact page to request an appointment at either location.
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