Many people are hearing more about using a revocable living trust in place of a will. While it is true that a properly managed revocable living trust provides unique benefits, it does not completely replace a will. In determining whether this type of trust is right for you, it helps to understand the major purpose, benefits, and tradeoffs of this estate planning tool.
A revocable living trust is created during your lifetime, and you can alter it in any way and at any time. One of its key features is that it allows you to retain control of the management and distribution of your assets.
The Probate Issue
Many people establish a revocable living trust to avoid probate, which is the legal process of settling your estate. Assets distributed from a trust upon your death do avoid probate. However, the probate process itself is not as burdensome for many estates as in the past.
But, even with improvements in the probate process, the probated assets in your estate still become a matter of public record, which raises important privacy concerns. Avoiding probate may also make sense if you own properties outside your country of domicile, which means your estate would be subject to multiple probate proceedings.
Once you set up a trust, you must transfer assets into it. Failing to do so will subject your assets to probate. Simply signing a trust document without retitling assets renders your living trust useless.
The short answer is yes. Generally, a revocable living trust cannot entirely replace the need for a will. There are some assets you may not wish to place in a trust. For example, it may be impractical to transfer tangible personal property such as automobiles, furniture, and jewelry to a trust. Consequently, some of your assets will remain outside your trust, making a will necessary to specify your intended beneficiaries. If you have minor children, a will may also be used to designate a guardian for them.
Also, some assets may require special considerations. For example, retirement plan accounts (Individual Retirement Accounts (IRAS), profit-sharing plans, and Keoghs, to name a few) cannot be retitled to a living trust, although you could change the beneficiary designation to the trust. However, naming someone other than a spouse as beneficiary of a qualified retirement plan may require spousal consent, since in many nations a spouse does have the right to retirement plan benefits. In addition, naming your trust, rather than your spouse, as the beneficiary of your qualified plan may have income tax consequences when you die.
Advanced Issues
Revocable living trusts are complex legal documents. In addition to the advantages mentioned, they offer other benefits, as well. For instance, under the right circumstances, a properly funded living trust can help reduce estate taxes.
The bottom line is that qualified legal expertise is a must to help ensure proper planning. Your legal professional can help you examine all variables affecting your property-the type of assets (e.g., real estate, life insurance, banks accounts, savings, business interests, and personal property), where they are located, and how they titled and determine if a revocable living trust can benefit your short-and long-term estate planning goals.
Often, the prospect of writing a will brings up feeling of discomfort. Devising a will is one of the most important factors in estate planning, one that should promote feelings of security. Doing so means that heirs will be provided for and your distribution wishes will be met. Like many people, have you postponed the task of writing a will? Or, is it time to review a will drafted years ago? A will is a formal, legal document instructing your survivors in the settlement of your estate. A qualified, experienced, legal professional can help ensure your will is properly written and contributes to the overall success of your estate plan.
Composing a will helps to ensure that you control how your estate is divided. Rules govern how your estate will be divided and by whom. Some people may believe their estate is too minor to need a will, but even if you believe this is the case, you should consider writing one anyway. The reason is simple: If you die without a will, you automatically forfeit the chance to direct the dealings of your estate. In addition to facilitating bequests, a will is an opportunity for you to designate your own executor, guardians for minor children and other fiduciaries.
If you have decided that you would like your estate to pass to personal friends or charity, a will is the primary means of fulfilling these wishes. Without a will the courts will have no way of knowing your preferences and will seek relatives however distant for distribution purposes. For those who have a life partner or not married, wills are a means of helping to ensure that these loved ones will be included. In addition a will offers the opportunity to designate a secondary beneficiary in the event of the primary beneficiary's death.
Even those who have shifted the majority of their assets into trusts or who use joint ownership should draw up a will. While these methods are designed to bypass probate (the judicial process that establishes the validity of a will), they are not able to cover all assets. A will, however, does have the potential to cover all assets, leaving no property unaccounted for and no stone unturned.
Wills are a means of providing security to you and your loved ones. The topic may be emotionally challenging, but when the many advantages are considered, they far outweigh temporary discomfort. Careful estate planning is the best way to identify how your assets will be divided, who is to be named executor and who will receive benefits according to your wishes. Consult a legal professional for specific guidance.
Liquidating the family business in order to pay estate taxes is often an unpleasant reality for families of individuals who die without wills or estate plans. If you own a family business, you should consider taking steps now to help assure one of your most valuable assets will still be around for your children, grandchildren, and beyond.
The Plain Facts
The terms "family business" or "small business" can be misleading, especially when you consider the impact these businesses have on the global economy.
It is natural to assume that many business owners would like to keep this kind of influence in the family. However, in reality, the situation is much different-only a fraction of business owners who want their family business to remain in the family take active steps to devise a formal succession plan.
Why is it that only a small number of business owners act on their intentions? Simply put, business continuation is often a difficult subject for family business owners to confront. In many cases, succession is often avoided, rather than planned. It is often a taboo topic.
Business owners may be reluctant to hand over a business they spent much of their lives building. They may be forced to confront and resolve sibling rivalry and other unpleasant family disagreements. Sometimes, an owner will have greater difficulty grooming a family member for succession because of the overlap of family and business boundaries. Additionally, if the owners plan to rely on the family business for retirement income, they may worry about the success of the business under new owners.
Survival Planning for Your Company
However, the costs of not planning for the continuation of family businesses may be enormous. Often, companies without formal succession plans are courting disaster.
How can you make sure that your business will survive for successive generations? A sound solution is to establish an estate plan. Simply put, you need to do the following:
Develop a formal management succession strategy that will help ensure your business stays in the family after your death.
Equalize your estate so that if you have children, you can make alternative bequests to those who do not want to be involved with the family business. At the same time, you can leave the business to the children who do wish to be active in the business. Guarantee that the business continues in an orderly manner after your death. Create a buy-sell agreement for family and nonfamily members who may own stock in your business.
As you can see, ensuring that your business lives on is a complicated issue that engenders many concerns. Care must be taken to ensure that all issues will receive open and honest discussion. With the right estate planning team and the right succession plan in place, you may be able to beat the odds to maintain your company's success and ensure your family's ownership for future generations.