How Trusts Avoid Probate and Protect Privacy
Probate and the formal estate administration process can take considerable time and legal knowledge to manage properly. For that reason, many people now ask their estate planning attorneys to set up a revocable “living” trust to avoid probate. As an added benefit, trusts allow property to pass discreetly, unlike the public records created in court during probate.
To understand why these types of trusts are so popular, it is helpful to review the probate process and how trusts operate to enable your loved ones to bypass that process.
Formal Estate Administration
When someone passes away, the government wants to make sure that their bills and taxes are paid, and that their remaining property is distributed appropriately. They do this through the probate process. The court determines whether there is a valid will and authorizes someone to manage the deceased person's estate. The process requires certain steps to be completed in a specific order with court approval at various stages. None of the beneficiaries named in the will or heirs slated to inherit if there is no will can receive any property until the probate process is complete, and that can take up to a year or more.
Probate can place a large burden on family members, especially when quick access to assets is not allowed. In addition, the will becomes a matter of public record once it is submitted for probate. That is why probate avoidance is often a goal for people who want to make the transition easier for loved ones.
Trusts to Avoid Probate
A trust is a legal entity created to own or hold property. The property is transferred into the trust by the grantor, and then it is managed by the trustee. In many cases, property is held in a trust for individuals who are too young to legally own it or who lack the capacity to manage it properly. These are the beneficiaries. The trustee distributes funds to the beneficiaries as needed or as directed in the trust documents.
With a revocable living trust set up to avoid probate, the person creating the trust—the grantor—is also the trustee and the beneficiary. So, they manage and use the property in the trust the same way they did before the trust was created.
However, when they pass away, the property in the trust does not need to go through probate. Instead, it passes directly to alternate beneficiaries. In addition, the trust can be set up to allow an alternate trustee to manage and distribute funds if the person who created the trust becomes incapacitated and unable to manage their own affairs.
When the Grantor Passes Away
During the lifetime of the person who created the revocable trust, they can use property, change the terms of the trust, or revoke it completely. Once they pass away, their alternate trustee pays any bills left behind and then distributes funds to the alternate beneficiaries without the need for court supervision, and the associated time delays involved in the court process.
The trust documents remain private unlike a probated will. Property passes according to the grantor's wishes without going on the public record.
Get the Right Trust to Meet Your Needs
Trusts can be set up to bypass probate, but they can also serve a number of other purposes such as providing care for loved ones with special needs, reducing tax liability, and planning for an expected incapacity. At Peach State Wills & Trusts, we can develop a trust custom-tailored to meet your particular needs. Contact us today to learn more about the ways we can help you prepare for whatever the future may bring.