Beneficiary proceeds, such as those from a life insurance policy, are intended to be available immediately upon death and paid to the beneficiary outside of probate. However, the court will have to become involved if your beneficiary dies before you or at the same time as you, is incapacitated or a minor when you die, or if you have named, “my estate” as your beneficiary. If your beneficiary does receive the proceeds, he or she may not be responsible enough to handle such a large sum of money.
When your trust is the beneficiary, the proceeds will be paid to your trust. Your successor trustee can then use the funds to provide for a beneficiary without court interference and/or distribute them as you direct.
That said, there may be valid tax reasons to name your spouse as beneficiary of an IRA or other tax-deferred plans. Also, if your estate would be subject to estate taxes, you may want to consider a life insurance trust. Your attorney will be able to help you make the best decisions.
How Should My Beneficiaries Inherit?
That is completely up to you. Options include lump sum distributions, installments, income matching, and keeping assets in trust to protect them from irresponsible spending, creditors, ex-spouses and predators. You know your beneficiaries and how they manage their own money.
What About Minors?
If a minor inherits directly from you, the court will take control until the child legally becomes an adult. Then, after all guardianship expenses have been paid, the child receives the remaining amount in one lump sum.
If you set up a children’s trust within your living trust, the trustee can provide for minor children or grandchildren at your death or incapacity, until they reach the age you want them to inherit – with no court interference.
This is better than having a children’s trust in a will because it cannot be established until after you have died and the assets have gone through delays and expense of probate. If you are incapacitated, a children’s trust in a will cannot even go into effect – because, remember, your will cannot go into effect until after you die.
Is A Living Trust More Expensive Than A Will?
Initially, yes. One reason is that a living trust usually has more provisions than a will because it deals with issues while you are living and after you die. A will only deals with issues after you die. The more complete trust preparation fee is well worth it and, in the end, it often winds up to be less expensive.
In summary, a basic estate plan involves a revocable living trust, a pour over will, a durable power of attorney, and a medical directive which gives your agent the right to make medical decisions for you. An additional document may be required to give your agent access to your medical records, due to HIPPA laws.
Benefits of A Living Trust
- Provides for easier more efficient administration of your Estate.
- Is more difficult to contest than a Will.
- Avoids cost, delays and loss and control of Probate at death.
- Minimizes emotional stress on your family.
- Allows you to control how and when your beneficiaries will inherit.
- Protects assets from a beneficiary’s creditors, x-spouses and irresponsible spending.
- Marshalls together all of your assets under one plan making it easier to make changes and to provide more fair and equitable distributions.
- Can be changed or cancelled at any time.
- Can reduce or eliminate estate taxes.
- Provides for professional asset management, if necessary.
- Provides for maximum control, privacy and peace of mind.
For more information on Losing Control Over Assets In A Trust In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 384-6500 today.