When you discuss your options with an estate planning attorney, you will learn about the revocable living trust. This device is a popular alternative to a simple will because it provides benefits that are simply not there when a will is utilized. The simplicity of the trust administration phase is one of them.
Probate
One of the benefits of a living trust over a will is the streamlined estate administration process. The executor that is named in the document would admit the will to probate, and the court would provide supervision during the administration phase.
Creditors must be notified about the passing of the decedent, and they are given time to come forward seeking payment. The executor will identify and inventory the assets, and this can be easier said than done in some cases.
If anyone wants to contest the will, they have an open window of opportunity during the probate process, because the court examines the will to determine its validity. This is called a “proving of the will.”
All this takes time, and no inheritances are distributed until the estate has been probated and closed by the court. Considerable expenses accumulate, and this will eat into the inheritances that will eventually be received by the heirs.
Another disconcerting element is the loss of privacy. The records are available to any interested party who would like to access them, and this information can raise eyebrows and potentially cause hard feelings.
When a living trust is used as a vehicle of asset transfer, the trustee would distribute the assets outside of probate. There would be no court involvement, so the negatives that we have described would be avoided.
Flexibility
In addition to the above, the assets are neatly listed on a schedule, so the identification and inventory process is simplified. To account for any property that may have never been conveyed into the trust, you can include a pour-over will in your estate plan.
This type of will would allow the assets to be absorbed by the trust, so there would be eventual consolidation.
Disability Planning
A significant percentage of elders become unable to handle their own affairs at some point in time. Alzheimer’s strikes over 30 percent of the oldest old, and this is not the only cause of incapacity.
When you have a living trust, you would act as the trustee while you are alive and fully competent. When you are drawing up the trust declaration, you name a successor trustee to assume the role after your death.
You can also give this successor trustee the ability to step into the role in the event of your incapacity.
Spendthrift Protections
If you have concerns about the money management capabilities of someone on your inheritance list, you can include a spendthrift provision. The trust would become irrevocable after your death, and the principal would be out of the reach of the beneficiary and their creditors.
You can leave instructions in the trustee concerning the way you want your assets to be distributed to the beneficiary. The trust can remain active for an extended period of time, and the trustee could provide incremental distributions on an ongoing basis.
Legal Guidance
A family member or someone else that you know can be designated as the successor trustee, and you could alternately use a professional fiduciary. If you name someone that is not a professional, they may face a learning curve.
Under these circumstances, legal assistance can be invaluable. We can be engaged to provide guidance during any phase of the trust administration process, and we would be uniquely qualified to do so if we draw up the trust for you during the planning stage.
Other Types of Trusts
In addition to the revocable living trust, there are many other types of trusts, and they serve targeted objectives. Let’s look at a few examples.
Supplemental Needs Trust
Most people with disabilities rely on government benefits like Medicaid and Supplemental Security Income. These are need-based programs, so you cannot qualify if you have significant assets in your name.
Given this reality, a direct inheritance can be problematic. To account for this, you can use a supplemental needs trust to set aside resources for a loved one with a disability.
The trustee would be able to use the assets to make the beneficiary more comfortable in many ways. As long as the rules are followed correctly, benefit eligibility would not be negatively impacted.
Estate Tax Efficiency Trusts
There are a lot of very wealthy people in the Hilton Head area, and the federal estate tax can be a source of concern for these folks. It carries a maximum rate of 40 percent that can take a significant bite out of your legacy.
Unfortunately, there is a credit or exclusion that can be used to transfer a certain amount tax free. In 2024, this exclusion is $13.61 million, but it is going down to the 2017 level of $5.49 million indexed for inflation at the beginning of 2026.
Some irrevocable trusts are used to gain estate tax efficiency. These would include the generation-skipping trust, grantor retained annuity trust, charitable lead trust, and qualified personal residence trust.
Incentive Trust
Another option is the incentive trust. To use an example to explain, suppose you will be leaving an inheritance to your grandchild that has not yet attended college. You could set up an incentive trust that pays tuition.
It could also provide distributions to help with other expenses as long as your grandchild remains in school. There could be a dollar-for-dollar match of monies earned after graduation to foster a work ethic.
This is just one hypothetical scenario, but a trust can be used to guide a loved one toward a particular behavior or away from some type of destructive tendencies.
Schedule a Consultation Today!
We are here to help if you are ready to work with a Bluffton, SC estate planning attorney to put a plan in place.
Each situation is unique, and there are many approaches that can be taken. Personalized attention is key, and this is what you will receive when you choose our firm.
You can schedule a consultation right now if you give us a call at 843-815-8580, and you can fill out our contact form if you would rather send us a message.
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