The percentage of the population that take steps to avoid the complications and expense of the probate process has risen consistently during the last couple of decades. It is not a coincidence that this shift has been accompanied by middle class migration to the use of revocable living trusts. Revocable living trusts were viewed by many twenty years ago as an estate planning tool of the wealthy, but now ordinary folks are using this estate planning device to avoid the probate process. This blog articles examines the reasons that explain this shift in estate planning strategies.
The increased reliance on revocable living trust for succession planning is based in significant part on the potential hardships created by the probate process. The most unappealing aspects of the administration of a will through probate include the following:
• Expense: While many states including New Mexico have enacted simplified probate options that can reduce the expense of probate for those who qualify, probate can still deprive beneficiaries of a substantial portion of one’s estate. The expense associated with the probate process tends to rise with the size of the estate so that those who have acquired a fair amount of wealth face the risk of a greater chunk of their estate being eaten up in the probate process.
• Delay: The probate process is actually a multi-stage process that involves opening probate, conducting an inventory of assets, valuing assets, settling claims and finally distributing the remainder of the assets to beneficiaries. Even brief delays can work substantial financial hardships on one’s dependents when the primary breadwinner in a family passes away. The length of this delay differs from case to case, but it can take years if the estate is sizeable or parties challenge the will.
• Privacy: The probate process allows the personal financial matters of a family to become a matter of public record. Many people would like to keep the nature of their assets, net worth or other sensitive financial information private. The probate process like other court proceedings is generally open to the public so a family’s personal financial information is made public. This issue can be even more problematic if the decedent owned a business because proprietary information and trade secrets can be inadvertently exposed.
The widespread use of revocable living trusts by people from all walks of life is based in part on the ability of this type of estate planning tool to mitigate the undesirable consequences of the probate process. The benefits of a revocable living trust include the following:
• Control and Ownership of Assets: When a person sets up a living trust, he or she can structure the trust so that control, management, use and ownership over the assets is maintained. Further, if the individual establishes a living trust that is revocable, the trust can be modified or terminated based on future events or the changing priorities of the trust creator.
• No Delay in Access to Assets: Because there is no need to conduct probate proceedings, the beneficiaries of the trust will generally have access to funds immediately subject to the trust creator’s instructions. The benefit of avoiding administrative delay is extremely important for a family breadwinner in ensuring that one’s spouse, children and other loved ones are provided with the financial resources necessary to meet their needs.
• Confidential Financial Information Kept Private: There is no public court proceeding so the specifics regarding the nature and extent of one’s assets can be kept confidential.
Despite the benefits associated with creation of a revocable living trust, critical mistakes can undermine these benefits without sound legal advice from an experienced New Mexico Estate Planning Attorney. A poorly drafted or improperly executed living trust agreement may give rise to litigation or even result in opening the door to probate if the trust agreement is invalid. Alternatively, some people fail to effectively transfer assets into the trust or add newly acquired assets so that they are not part of the trust, which may make probate necessary for the distribution of those assets.
Think You Can’t Afford a New Mexico Estate Plan? Consider the Cost of Not Having One
The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.
Our New Mexico Probate Attorneys provide legal advice and legal representation to those considering available estate planning strategies. The experienced New Mexico Estate Planning Lawyers at Jay Goodman & Associates, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your options. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.
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