Frequently Asked Questions About Living Trusts and Probate
What are the advantages of a Living Trust?
Assets held in your trust avoid probate when you die, that is, your Successor Trustee will be able to administer and distribute your trust assets upon your death without the need to involve the court. A living trust will also allow the Successor Trustee to manage trust assets for your benefit during your lifetime, for example, if you become incapacitated, without having to seek authority from the court.
A living trust, in and of itself, does not reduce estate taxes (see answers to FAQ regarding Taxes.) However, you can include estate tax planning in your living trust and other estate plan documents, especially for a trust signed by a couple.
Remember, a revocable living trust does not protect your assets from creditors. If you as the Settlor retain the power to revoke the trust, the trust property is subject to the claims of your creditors, both now and upon your death.
What is Probate?
Probate generally refers to the formal court supervised administration of a decedent's estate. An overview of probate is provided in the to FAQ regarding Probate.
Why should I want to avoid Probate?
There are three drawbacks to Probate which prompt many clients to elect to pass on wealth through a living trust, without the need for the court to be involved:
- Cost of Probate
- Delay in Distribution of Assets
- Lack of Privacy
See answers to FAQ regarding Probate for an explanation of the drawbacks.
Does a court ever get involved in the distribution of a trust after the Settlor dies?
Hopefully not. If the trust is contested, the matter is decided in the probate court. If there is ambiguity in the trust, the Successor Trustee can file a petition for instructions. If the Settlor failed to properly re-title an asset in the trust name, the Successor Trustee may be able to obtain an order finding that the asset is in fact a trust asset (known as a "Heggstad petition", or an "850 petition".) That would allow the Successor Trust to administer, sell or distribute the asset without probate.
Is a Living Trust for everyone?
No. Some individuals do not own enough assets to be concerned with probate. Other individuals may have great wealth but they hold title to their assets in a manner which will avoid probate when they die, such as joint tenancy. Still others actually wish to have the court involved in the administration of their estate to make sure their wishes are carried out after they die.