Probate is the court process used to transfer certain assets after someone passes away. Depending on the circumstances, probate can take time, cost money, and require court filings and other administrative steps.
Another concern for many families is privacy. Probate is generally a public court process, which means information filed with the court may be accessible to the public.
So, how can a trust help avoid probate?
Here’s How It Works
When you create a revocable living trust and properly transfer your assets into the trust, those assets are no longer owned by you individually. Instead, they are owned by the trust.
You can still use and control your assets during your lifetime. You can generally buy and sell property, manage your bank accounts, and make changes to your trust as your circumstances change.
The important distinction is that the assets are held in the name of the trust rather than in your individual name.
When you pass away, the assets owned by the trust do not have to be transferred through your Will and probate. Instead, the person you named as your successor trustee can step in and manage the trust according to your instructions.
So, What Happens Instead?
Instead of a court overseeing the transfer of the trust assets, your successor trustee takes over.
The trustee has a responsibility to follow the instructions you included in your trust. Depending on the terms of the trust, that may include identifying and valuing assets, paying appropriate expenses or debts, and distributing property to your beneficiaries.
For example, let’s say you own a home, bank accounts, and investments and you have properly transferred those assets into your revocable living trust.
When you pass away, your successor trustee does not need to take those trust assets through probate simply to transfer them to your beneficiaries.
The trustee follows the instructions you left behind.
This can make the process much more straightforward for your family.
Why Do People Choose a Trust?
Avoiding probate is one of the biggest reasons people choose to create a revocable living trust, but it is not the only reason.
It Can Save Time
Probate can involve court filings, notices, deadlines, and other steps. When assets are properly held in a trust, your trustee can generally handle the trust administration without going through the probate process for those assets.
It Can Reduce Stress
Losing someone you love is difficult enough.
A well-prepared estate plan can give your family clear instructions about what should happen to your assets and who should be responsible for handling them.
Instead of your loved ones having to figure everything out on their own, your successor trustee has a roadmap to follow.
It Can Provide Privacy
Because trust administration generally takes place outside of the probate court process, the details of the trust and the distribution of trust assets are generally more private than assets that are handled through a public probate proceeding.
For many families, that privacy is an important benefit.
But There Is an Important Catch
Creating a trust is only part of the process.
For a trust to help you avoid probate, your assets generally need to be properly transferred into the trust.
This is sometimes referred to as funding your trust.
For example, you may sign your revocable living trust, and feel like your estate plan is complete. But if your home, bank accounts, or other assets were never properly transferred into the trust, those assets may still need to go through probate after you die.
That is why funding your trust is so important.
Your estate plan is not finished simply because the trust document has been signed.
Does a Trust Avoid All Probate?
Not necessarily.
A revocable living trust can help keep properly funded trust assets out of probate, but that does not automatically mean every asset you own will avoid probate.
You may have assets that are not owned by the trust, such as certain personal property, accounts with beneficiary designations, or other assets that require separate planning.
There may also be circumstances where a probate is necessary for assets that were not properly transferred to the trust.
This is why your estate plan should be reviewed as a whole.
What Happens If You Become Incapacitated?
Another benefit of a revocable living trust is that it can provide a plan for managing your assets if you become unable to manage them yourself.
While you are able to manage your affairs, you can generally serve as the trustee of your own trust.
You can also name a successor trustee who can step in if you become incapacitated or when you pass away.
This can provide continuity and allow someone you trust to manage the assets according to your instructions.
Is a Trust Right for You?
A revocable living trust can be a powerful estate planning tool, particularly if avoiding probate and maintaining privacy are important to you.
But a trust is not automatically the right solution for everyone.
Your estate, your family, your property, and your goals are unique. The best estate plan is one that is designed around your particular circumstances and properly implemented.
If avoiding probate is important to you, it is worth taking the time to understand your options and make sure your assets are set up to work with your estate plan.
If you are wondering whether a revocable living trust is right for you, let’s talk through your options. Schedule your consultation today!
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