Estate planning is essential for ensuring that your assets are distributed according to your wishes. One effective tool in this process is a living trust, which can help avoid the lengthy probate court process. By establishing a living trust, you can ensure a smoother transition of your estate without the complications often associated with probate court.
Let's consider an analogy. Imagine two empty fruit bowls in front of you. The bowl on your left contains one piece of fruit. This piece of fruit represents a will. A will serves a single purpose: it states who inherits your assets when you pass away. However, a will does not prevent your estate from going through probate court; it is entirely public. Anyone can access it through the court system while you are alive and after your death. Additionally, a will can be easily contested, which can drain your estate due to costly probate fees. If your will is challenged, your assets may be tied up for years in probate. Importantly, a will does nothing to aid you while you are alive, which is why many opt for estate planning strategies like a living trust.
Staying with the analogy made above regarding the two fruit bowls; the one on your left has one piece of fruit. However, the fruit bowl on your right is full of fruit, representing a living trust. In the context of estate planning, a trust serves multiple purposes. While you are alive, it designates who will make financial and medical decisions in the event you become incapacitated. This defines the 'living' aspect of a living trust. In contrast, a will does not address matters relevant to your lifetime. A living trust ensures complete privacy, avoiding any involvement with probate court, making it difficult to contest. Furthermore, assets are transferred to heirs from a trust swiftly. As highlighted earlier, consider the trust as a comprehensive contingency plan for your life.
The answer is simple. A living trust is an essential component of estate planning as it prevents assets, like your home, from being seized by probate court upon your passing and maintains complete privacy. Furthermore, a quality living trust ensures a smooth transition of assets by naming beneficiaries, which is why it's referred to as a living trust.
If you are married, then someday, one of you will be left. If you are alone and later become disabled or hospitalized, the documents included with your living trust will have legal authority over your accounts and will also make medical decisions until you recover. Even better, you will have made all the complex medical decisions in advance as part of your estate planning. The person you chose to enforce your decisions will be required to do so. If you don't name someone in advance, then the probate court will decide who gets this authority.
The documents that assist you when disabled are known as financial and medical powers of attorney. This aspect is part of estate planning, specifically the 'living' part of a living trust. A living trust is much harder to contest than a will, which is important for avoiding complications in probate court. A well-structured trust will include a 'poison pill' provision (and ours does), stating that anyone who contests their share or challenges the trust will only receive $1.00. Additionally, a solid living trust will designate both a primary and secondary guardian for minor children under 18.
Throughout your life, you have accumulated assets. By establishing a will, you may inadvertently expose your estate to easy challenges in probate. In contrast, a living trust creates a contingency plan to support you both during your lifetime and when you ultimately pass on.
