The Last Will and Testament and other forms of the Will were covered in our most recent article. Often going alongside a Will is one or more trusts. A revocable living trust is the tool in the Estate Planning Toolbox for holding and distributing a person’s assets to avoid probate. In its simplest definition, the Trust is an entity separate from you that allows you pass assets anyone designated in the trust.
First, a word about probate. Probate is a court process that oversees the administration and distribution of the assets of a deceased person. As part of the process, the court system validates a person’s Last Will and Testament, if they have one. While the probate process is not “scary,” it can eat up a lot of time and money. That is all the more reason to turn to an experienced Estate Planning attorney for help in how to avoid that unnecessary cost and delay.
A Trust skips the probate process
How does a Trust skip the probate process? A Trust is an entity separate from you that holds your assets while your alive and sets forth how you want your assets handled after your passing. Since a Trust is a separate entity from personally, when you pass away your Trust continues. Since a Trust cannot “pass away” anything titled in the name of the Trust would not be subject to the probate process. Properly titling assets in the name of a Trust, often referred to as “funding,” avoids probate on those assets. This is why an experienced attorney will talk you through the process of retitling assets into your Trust.
Listing assets, changing titles
After the Trust is set up, the Trust ‘owns’ the property. A Trust is only worth the assets that are titled into it. This is the step that trips up many who don’t use an attorney for the trust. For many things – jewelry or collections as examples – the trust simply lists the assets in detail. Real estate is a bit different in that the deed or title (see related article) has to be changed to list the trust as the actual owner of the property. This isn’t complicated. Still, when this step is overlooked, your assets could end up in probate.
Avoid double counting and under counting
Your retirement plans and insurance policies already have beneficiaries. This money doesn’t end up in probate, but the assets also don’t flow into a trust, unless you’ve set the trust as the beneficiary. That tactic can seem confusing, but it points out the importance of looking at beneficiaries of things like life insurance and IRAs at the same time as the trust is created. You might have even forgotten who you listed as the beneficiary over the years since opening the IRA or policy.
In the last article, we covered the Pourover Will. The pourover helps you take care of assets you may have overlooked by sweeping them into a trust. In our next article, we’re going to cover Powers of Attorney that will help you take care of yourself.