Many people assume that a last will is the only logical way to facilitate asset transfers if you are not very wealthy. They are aware of the existence of trusts, but they are under the impression that trusts are only used by millionaires who have very complicated estates. The lawyers at our estate planning law firm hear this all the time. We find that their clients are quite surprised when all of the facts are explained to them.
When you create a Will, you name an executor to administer the estate after you are gone. If the decedent died in the Inland Empire, this individual is under supervision of the Probate Court of either Riverside or San Bernardino County . Under the laws of the state of California, the Will would be admitted to probate. The public would be notified about the passing of the decedent, and the court would determine whether or not the executor that is named in the document should be empowered.
Assuming there are no objection to the appointment of the executor by the court or others, the executor will receive Letters Testamentary, the official document that gives the executor power over the decedent’s assets. The executor is then responsible for identifying and inventorying all the assets of the estate. This can take time. Creditors must be identified and paid before assets can be distributed. The fastest a probate can be closed in the Riverside and San Bernardino Courts is about eight months to a year. Many probate take a longer time. Generally, no distributions to beneficiaries until after these steps have been completed.
Probate can be expensive. There are court filing fees and other costs, publication costs, executor commissions, legal fees paid to probate lawyers, appraisal costs, and other miscellaneous expenses. All of his red ink reduces the amount of the distributions the beneficiaries will receive.
There is also the matter of privacy lost. When someone famous passes away, you may read details in the media about the way that their estate was handled. This is because of the fact that probate records are available to the general public, so anyone that is interested can go to the Probate Court and access the probate file. Information about the assets and beneficiaries of the estate are a part of that file.
You do not have to use a Will as the primary component of your estate plan. There are some basic asset transfer methods that would facilitate probate avoidance, including joint tenancy. For example, if you were to add a co-owner or joint tenant to your deed, this individual would inherit the entirety of the property after your passing outside of probate.
These methods sound effective on the surface, but they are quite risky on a number of different levels. For example, with joint tenancy, the person that you name as the co-owner of the property would own that portion while you are still alive. If the joint tenant runs into to financial difficulties and has a creditor or the IRS pursuing them, the joint tenancy account you have with them is vulnerable. The joint tenant may also declare bankruptcy and the bankruptcy trustee may pursue the assets in your joint tenancy account.
For a very significant percentage of people, a revocable living trust will be the ideal alternative to a last Will. When you create this type of trust, you can serve as the trustee while you are alive and fully capable of making sound decisions. The trustee is the administrator of the trust. You are also the designated beneficiary while you are alive, so the assets can only be used for your benefit. Finally, because the trust is revocable, you can always take your assets back and title them in your own name.
Since the whole point is to facilitate future asset transfers to your loved ones after you are gone, you name a successor trustee to take over management of the trust after your passing. Your also designate the beneficiary or beneficiaries who will receive the trust assets. The asset transfers that will ultimately take place will not be subject to the probate process.
First, a trust can be used to facilitate the management of your assets by a trusted individual should you become incapacitated. Second, distributions from the trust can be structured to protect your beneficiaries. For instance, if you have a special needs child, the share of your trust designated to go to him or her can be structured as a Special Needs Trust. This will allow your beneficiary to receive his or her inheritance without losing his or her government assistance. If your have a minor beneficiary, the inheritance can be held until the minor achieves a certain age or perhaps achieves certain life goals like obtaining a Bachelors Degree. If the beneficiary has an alcohol, drug or gambling addiction, his or her share can be structured so he or she does not get immediate access to the inheritance and it can even include incentives for the beneficiary to seek assistance with the addiction.
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As you can see, there are many alternatives. Toy can schedule a consultation with one of our attorneys at our Riverside office by giving us a call at 951-888-1460 or requesting a consultation here.