Preserving Assets for your Intended Heirs

There are a number of methods by which a person can pass estate assets to heirs upon death. Assets can pass by intestate succession (without a will) under state law or according to an individual's wishes under the provisions of will. Except in the case of a very small estate, these methods require a court supervised probate, which is public, time consuming and expensive.

Avoiding Probate

While there are some instances where a will is the instrument of choice for passing assets, a person should always consider the alternative methods which will avoid probate. Some of the alternatives, such as joint tenancies, totten trusts and life insurance, are useful, but limited in scope and containing pitfalls for the unwary. With increasing frequency, estate planners are encouraging their clients to take a serious look at living trusts.

Living Trust

A living trust (also called an inter Vivos Trust) is created when one person (called the Trustor, Settlor or Grantor) transfers to another person or corporation (called the Trustee) a property interest to be held for the benefit of himself/herself or others (called the Beneficiaries). It can be revocable by its terms during the Trustor's lifetime, offers privacy as to who inherits the estate and how much, and it provides for assets in the trust to pass upon death without the necessity of probate.

A living trust can also be used as a vehicle for saving estate taxes. With proper planning, estate taxed on a community estate of up to $1.2 million can be totally avoided.

There are potential disadvantages to establishing a living trust, such as additional paperwork and record keeping, lack of court supervision when it may be advisable, and higher initial attorney's fees than for a will. Both the advantages and the disadvantages of a living trust or of the other instruments mentioned in this article should be discussed with an attorney experienced in estate planning in view of the individual circumstances presented.