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Most people want to make things as easy as possible for their families. Whether you have a Will, Trust, or perhaps nothing at all, will significantly affect your family’s experience as they work to administer and distribute your assets after you’re gone.
Typically the debate about having a will or living trust comes down to wanting to avoid probate.
What is court-supervised probate?
The probate process is essentially a judge watching over the process of your assets being gathered, valued, and ultimately distributed to your heirs. So the definition of probate is that it is a court-supervised process for distributing the assets of a decedent. This means that if you pass away and own assets, a court will have to approve a transfer of those assets from you to your heirs.
It must be emphasized that having a will in place does not avoid probate. People mistakenly believe that if you have a will, your assets will quickly be distributed as outlined in the will. A will simply tells the judge how to distribute your assets. Another related misconception is that a simple will and transfer on death deed of your residence avoids probate. This mistaken belief does not always preclude a court from overseeing your estate after death.
Passing away and not having a will in place will result in the court looking to intestate succession laws to determine who your heirs are and who should receive your assets.
The probate process is the same whether you have no estate planning documents, no will, or a simple will in place.
Is avoiding court-supervised probate important to me?
A probate is a public matter; if you die with a simple will in place, the will is lodged with the court and becomes public information. Who you leave your things to, who you’ve chosen to be your executor, and who you have intentionally omitted from your will all become public knowledge. As part of court-supervised probate, there will be an inventory and appraisal of all of your assets, which becomes a public record as well. To obtain an accurate appraisal, court appraisers often must enter the decedent’s home to value and account for personal effects owned by the decedent at their death.
In a relatively simple estate, the average probate takes close to 18 months from start to finish. During this timeline, your heirs and family are waiting to access any assets which you have left for them to inherit. At the end of this process, the court will issue an order effectively transferring your assets to your loved ones.
In more complex estates that hold businesses or multiple real properties, one can expect the probate process to be longer than the typical 18 months – and in many cases, a couple of years is average.
Real property must be probated if, at your death, it has an excess value of $61,500.00. Real property excess of this amount will be transferred or sold under the court’s supervision. Suppose you own real property in a different, or multiple, states at your death. In that case, there will typically have to be a probate in each state where you own property.
It is worth mentioning that the costs and fees attendant to a court-supervised probated are determined by statute and are typically several times more expensive than putting a thoughtful estate plan in place during your lifetime.
For many families, probate is lengthy, expensive, complicated, and emotional for the family with virtually no privacy and the feeling of little control.
So what’s the difference between a will and a living trust?
Recall that a will tells the court who you want to receive your assets after you die.
A living trust is different. A living trust is a way to avoid probate. The way that works is the living trust is created; you, as the creator, will transfer ownership of your assets out of your name and into the name of the trust, so you are no longer the owner; instead, the trust is the owner.
A living trust creates a scenario where you don’t own any assets when you pass away. When you create a living trust and transfer your assets to it, you simply continue to manage it in the same manner you would before transferring assets to a trust.
So as long as you’re alive and able, you’re the trustee. At your incapacity or death, you will have named someone to be your successor trustee, and that’s the person you select to step into your shoes after you’re gone. That person would have all of the same powers you had while you were the trustee of your trust. The successor trustee is also the person who will be responsible for making distributions to your beneficiaries according to the provisions you put in your trust.
Distributions to your heirs can be very creative and are typically made in one of the following ways.
- Directly to your heirs outright;
- Distributed at a specified age or in portions at specified age or time intervals;
- Distributions of income only, with principal distributed to grandchildren at your children’s deaths; or
- Distributed in a manner to protect inheritances from creditors and divorces and in ways to not disqualify children from receiving benefits.
A trust allows more control over not only who your beneficiaries are but how, when, and what they will receive regarding the distribution of your assets.
What is the better choice for my heirs?
You simply get to say who will receive your assets by having a will. A living trust allows you to add all of these other provisions, specific gifts, and important instructions to you – and your successor trustee would carry out your wishes exactly as you instructed.
If you own assets, a living trust can benefit your family if your goal is to create a clear set of instructions allowing your heirs to avoid court-supervised probate. Let me emphasize that a will can certainly work, but not in any way that’s going to be easy for your family and not in a way that gives you any say beyond the bare minimum as to what happens with your assets.
If you’d like to discuss your situation in more detail, please call us at (805) 934-4600 to schedule an appointment today.