|Top 12 Estate Planning Mistakes - #2 No Plan for Incapacity
One of the more popular speeches that I give is on the Top 12 Estate Planning Mistakes—How to Detect and Avoid Them. In this series of articles, I am going to cover one mistake per newsletter.
I had a client who was hit by a car while riding his bike. He was in a coma for 3 weeks. He and his brothers and sisters owned a family business, and my client was the only signer on the business account. We had to get a guardianship over him, and no one was able to sign checks for the business for 2 weeks until the court appointed one of the brothers as his guardian.
One of the ways this could have been avoided is with a living trust. If the client had set up a living trust prior to becoming injured and put his ownership of the business in it, then the trust would have named who was in charge of running the business if he became incapacitated.
Read more about avoiding this mistake on her blog.
Why do I want a Living Trust?
A living trust appears to be like a will, in that the creator of the trust names a beneficiary of all of his or her property. However, a living trust also names a trustee that holds legal title to all of the trustor's property on behalf of the beneficiary. The trustee must distribute the property to the beneficiary in accordance with the trustor's wishes as laid out in the living trust itself. It sounds a lot like an executor of a will and beneficiaries of a will, right? So if you have a will, why would you want a living trust?
Living Trusts Avoid Probate
A will isn't always the best plan for you and your family, because all wills must be probated after you die. Before the executor of the will can act on any stipulation in the will, the will must be validated by the local probate court. Since a will can only go into effect after your death, it does not protect you, your family, or your property if you become physically or mentally incapacitated. If you only have a will and such a tragedy does befall you, the court could instantly take control of your property and distribute it according to how the court interprets the law for your state. A living trust avoids the court in both of these situations, and allows you to maintain control of your property no matter if you're living or dead.
To learn more on why you should want a living trust, please visit our blog.
Thank you for the referrals!