Avoid Probate With A Living Trust

The Living Trust is an extremely useful tool in estate planning. Almost everyone, no matter what the size of the estate, should consider using a Living Trust.

A Living Trust is a document establishing a trust which holds your assets, and which distributes those assets according to your wishes. You might say that a Will does this, but you must keep in mind that a Will does not come in to existence until your demise. You might say you can accomplish the same result through titling property jointly with your spouse or child; but, again, you can't control what they do when they inherit the property.

What, then, does a Living Trust offer to make it so attractive? In the first case, a Living Trust offers you the opportunity to hold your house, your investments, or even to receive your life-insurance proceeds; so that, once death occurs, these assets flow into the Living Trust, and are then administered according to the provisions of the Living Trust.

For instance, the trust might say, "Take care of my husband during his survivorship, and then take care of my children until they're adults, and then distribute it to them in installments, at ages 30, 35 and 40."

The trust holding your assets prior to your death means that, upon your death, these assets are not part of your probate estate, and they are not required to be subject to probate. What is probate? Probate is the process whereby a person known as an Executor or Personal Representative puts forth your Will at the local county courthouse, and gets appointed to serve. All property in your name at death is then transferred according to your Will provisions. Public notice must be made to your next-of-kin; creditors will be able to see what you have, and snoopy people might also be able to inquire into your holdings.

On the other hand, when you have avoided probate, you have avoided the need to have these negative events occur.

In the case of life insurance, by having the Living Trust as the beneficiary of your life insurance, the insurance company is notified immediately that the trust is in existence, prior to your death. Therefore, immediately upon death, the proceeds are delivered to your trustees, without the hassle of waiting for an estate to be created. A Living Trust can also provide for disability. In other words, during your lifetime, you will remain the trustee of your own assets. You'll control your assets, and can revoke or amend the trust at any time you want. Essentially, this is the same as full ownership. You'll have provisions in the trust, which provide that should you become disabled, the moneys can be used for your benefit. Why is this an added advantage? Well, simply stated, loved ones will not have to go to court to have themselves appointed as custodian and guardian of you and your property, since you will have already provided for this in your Living Trust.

You might also name in your Living Trust the people who will serve as trustees after your demise. You can essentially make them the current trustees to serve along with yourself, and thereby have the opportunity to observe how they make their decisions. This could be your children, for instance, who are your co-trustees, and you could be working with them, so you can instruct them on how you want to see the assets invested and controlled.

Quite often, people will choose joint tenancy as a method to avoid probate and avoid the use of a Living Trust. In joint tenancy with right of survivorship, however, it means that the survivor gets the property outright. That might not be a good result: That joint tenant might be your daughter, and it might be that, upon your death and then upon your daughter's death, your son-in-law winds up with the property, which may not be where you want it to go. Quite often, you would want it to go to your grandchildren instead of your son-in law. You cannot control this when the property is titled as joint tenants. Thus, the major problem of joint tenancy is that you don't control the probate on the second death, nor do you control the gift or estate tax on that second death.

With regard to real estate, when real estate in different states is part of your estate, your Executor or Personal Representative will be required to probate your Will in each of the states where you own property. If that real estate is owned by a Living Trust, however, then the property is already titled in the name of the trust, and there is no need for multi-state probate.

Another issue of concern in estate planning is conflicts among family members. Families often don't agree. Quite often, there is a disgruntled member of the family who feels that he or she did not get enough of the assets. By using a Living Trust, and transferring title into the trust, there is no Will to contest, since the property has already been transferred. Through the use of videotaped signings and notification to interested parties, you can help your loved ones avoid a contest by use of a Living Trust.

Lastly, legal fees generally will be much less when a Living Trust is used as opposed to probating an estate. The reason for this is that the cost of the probate process can be eliminated or reduced, and not require extensive legal time. This is not to say that there will not be legal time required in order to transfer property.

It is generally recommended that the Living Trust be the first matter to consider when contemplating estate planning.