Property held in Trust does not go through probate if the trust holds the assets on death of the grantor. However, if you name your trust as a beneficiary under your will, any assets that pass to your trust on your death are subject to probate. For this reason, many individuals transfer title on a significant portion of their assets to their revocable living trust (“RLT”) during their lifetimes. Keep in mind, there are significant estate tax considerations involved in transferring property to a revocable living trust.
How is it that assets transferred to a trust in your lifetime avoid probate, while assets transferred to the same trust via your will do not? Simply stated, when you transfer assets to a revocable living trust during your lifetime, you no longer own them individually, even if you are the trustee of the RLT, and even though you can get these assets back at any time. So, when you die, the trustee of the trust (you) is replaced by the alternate trustee you have named, but the trust remains the owner of the trust assets. Actual ownership of the assets does not change. Since these assets do not “pass” to another under your will, they avoid probate. However, assets that pass under your will, even to your RLT, must be probated.
The probate process is time-consuming, expensive and public. On the other hand, assets passing outside of probate can be transferred to the beneficiaries quickly, inexpensively and privately. Planning to avoid probate can be done at your convenience, taking time to consider all of the options available to you. That is why many savvy individuals spend the time and money upfront using an experienced estate planning attorney, rather than leaving an expensive and time-consuming probate process to their family.
Estate planning is one of the issues you will need to work out with your family and your advisors. It is important that you have confidence that your attorney and the rest of your team know your situation and have the professional skills to work with you to develop and implement your estate plan.
Filed under: Estate Planning
