COVID-19: An Example of Just How Unpredictable Life Can Be. Why a Revocable Trust May Be a Great Starting Point For You
If COVID-19 has made you take a closer look at your financial plans, you’re not alone. You may have only recently started establishing a basic estate plan, or you may be rethinking the plans you had previously put in place. Now is a great time to review your financial strategies and consider establishing a revocable trust as part of your estate plan.
Chances are, you know the fundamental differences between a will and a trust, but have you considered why a trust might be the better decision for you? First, we review the differences and benefits of each.
What is a Will?
A last will and testament give instructions to the court of your final wishes, including who is in charge of implementing them, how the property is to be distributed, and who will care for any children under the age of 18.
The Probate Process
In order to establish a will, you will need to work within the probate court system. This requires that you file all documents with the court, and the documents then become a matter of public record. However, many people choose to establish a trust to avoid the public record, protecting their family’s privacy.
Establishing a will can also take a great deal of time, particularly in the pandemic’s current environment. The probate court process usually is very time-consuming, and with the court closures due to COVID-19, the process has become even slower.
Many probate courts are not currently open, and those that are open may be experiencing longer processing times due to backlogs. Additionally, probate can take several months before your loved ones actually gain access to your assets upon your death.
Establishing a will through probate is also a costly process. You will most likely want to hire an attorney, and in many cases, the process will cost more than it would to establish a trust.
What is a Revocable Trust?
A revocable trust is a living trust that can be changed or canceled by the grantor at any time during the grantor’s life. The assets within a revocable trust only transfer to its beneficiaries after the grantor has passed.
As the grantor of a revocable trust, you are still able to:
- Utilize the assets within the trust
- Distribute income earned to yourself
- Adjust the provisions of the trust
- Close or modify the trust at any time
When you establish a revocable trust, you will need to name a trustee responsible for managing the assets in the trust. In most cases, the grantor names themselves as the trustee and also names a successor trustee. A successor trustee manages the distribution of the trust’s assets after the grantor’s death.
Avoiding probate is a primary objective for many who establish a revocable trust v. a will. Additionally, trusts can maximize the efficiency of asset transfer to future generations.
What are the Benefits of a Revocable Trust, Especially During COVID-19?
As you consider whether a will or a trust might be right for your financial plans, you will want to factor in how COVID-19 has affected each.
Opting to establish a will during the pandemic means that you might be subject to further delays in addition to the already lengthy probate process. However, establishing a revocable trust allows you to avoid the time and cost associated with the probate system.
Avoid Complications and Stress
If you decide to use a will instead of a trust as part of your estate plans and your family has property in multiple states, know that your loved ones must go through the necessary probate proceedings in each separate state. This creates tedious work and additional stress for your family at an already difficult time.
Gain Financial and Legal Expertise
If you decide to establish a trust instead of a will, you also have the option to utilize a third-party corporate trustee.
Using a corporate trustee means that you will have the financial and legal expertise of a neutral party acting on behalf of the interests of the beneficiaries. It also relieves the trustee responsibilities of any children or family members in a way that a will does not.
Adding a Pour-Over Will to Your Revocable Trust
If you do decide to establish a revocable trust as part of your estate planning, you will want to consider adding a pour-over will to your trust.
A pour-over will automatically add any assets that were not included in your revocable trust to the trust upon your death. This avoids the possibility that remaining assets would instead be subject to the laws set by the jurisdiction in which a grantor passes away.
While avoiding probate is generally the primary reason people choose to establish a trust v. a will, there are many other benefits to including a revocable trust in your estate planning, especially during the current health pandemic.
Including a corporate trustee as part of your estate planning can further ease confusion and stress. Alliance Trust has helped many people just like you establish a revocable trust. Reach out to speak to an expert and find out if you might benefit from the many Nevada trust strategies such as Asset Protection.