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Note:
In all cases, when implementing WILL SUBSTITUTES in an estate
plan, legal advice is a must!
Despite what you may have read or heard, a living trust can’t always
fully replace a Will. Neither is trying to place all of your
property in joint ownership with your spouse an effective
replacement for
a Will. You’ll find it difficult to transfer
all
of your property to a trust or title
all
of your property in both your and your spouse’s names. Any property
you miss will be distributed under state intestacy law if you die
without a Will.
However,
living trusts and joint ownership each have a place in many estate
plans, for several reasons. One popular reason is to avoid probate.
Probate is the court-supervised process of proving and administering
a Will. This process is often time consuming and can be expensive,
depending on the size and complexity of your estate. Probate also
exposes your assets to public scrutiny. When your Will is probated,
its terms generally become public record.
Living
Trusts
A living trust
is probably the best strategy to avoid probate and protect your
financial privacy. A living trust is a legal agreement under which
you transfer assets to the trust to be managed by a trustee for the
benefit of one or more people, generally you and your spouse. The
trustee is responsible for administering the trust and managing the
trust assets. You can serve as your own trustee during your lifetime
or you may want to choose another person or organization to serve as
your trustee.
A living trust
can hold all types of assets — from your investment portfolio to
collectibles to your closely held business. Unlike your Will, a
living trust is not a matter of public record. If your trust
agreement provides for your trust to continue after your death, the
assets in the trust at your death will escape probate and any
ensuing publicity.
Pour Over
Provisions
Living
trusts have other estate-planning advantages, as well. You can use a
living trust to unify your estate’s assets under one manager and
provide continuing asset management for your family and other heirs
after you’re gone. How? In your Will, you can direct that any assets
not held in your living trust be “poured over” to the trust at your
death to be managed along with the other trust assets. Be aware,
though, that the assets placed in the trust at your death will be
subject to probate.
Joint
Ownership
Property you
and your spouse own jointly with rights of survivorship will pass
privately to your spouse outside of probate at your death. Using
joint ownership for the family home and a modest bank account or
investment portfolio is a simple way to help your family’s lives go
on as normally as possible while your estate is being settled. Be
aware, though, that using joint ownership precludes the use of other
estate-planning techniques that may help to save estate taxes and
may have other ramifications for your estate plan.
Community
Property
Community
property doesn’t pass automatically to your spouse. If your state
has a community property law, you and your spouse each own a
one-half interest in assets acquired during your marriage. So, when
one spouse dies, the survivor continues owning half of the assets.
The deceased spouse needs a Will to transfer the other half. Also,
during your marriage, you may have acquired assets that you own
separately — gifts and inheritances. You need a Will to determine
what will happen to this non-community property.
Beneficiary
Designations
You may
have significant assets that can pass outside of probate by
beneficiary designation rather than by Will. Life insurance
proceeds, qualified retirement plan benefits, annuities, and
Individual Retirement Accounts can go directly to beneficiaries
instead of through probate. Check to make sure you’ve designated
beneficiaries and secondary beneficiaries.
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