Revocable living trusts are widely used to enable probate avoidance. Let’s start off by explaining what probate is and why someone may want to arrange for asset transfers outside of probate.
In the state of New York the process of probate takes place under the supervision of the Surrogate’s Court. Contrary to the way it is depicted in the movies, a will is not something that is just read among family members. It must be deemed valid by the court.
Everyone has heard of will challenges, and these contested estate cases take place during probate. During this interim final bills must be paid, including taxes. The executor of the estate is charged with the responsibility of inventorying the assets that comprise the estate and subsequently preparing them for distribution to the heirs.
Why would anyone want to avoid probate? For the most part, there are three reasons.
One of them is the fact that significant expenses can add up during probate including accountant fees, legal fees, court costs, the executor’s fee, appraisal charges and others.
Secondly, probate can be time-consuming.
Thirdly, probate records can be accessed by the general public, so anyone who is interested can know all the details about your estate.
Revocable Living Trusts
While there are other ways to transfer assets outside of probate revocable living trusts are a popular choice.
With a revocable living trust the grantor of the trust conveys assets into the vehicle. A trustee must be selected to administer the funds that have been placed into the trust. The grantor also chooses a beneficiary or beneficiaries who will receive monetary distributions out of the trust.
One of the appeals of these trusts is the fact that the grantor can retain control of the property that has been placed into the trust while he or she is still alive by serving as both the trustee and the beneficiary.
The grantor of the trust has the right to dissolve the trust at any time because it is in fact revocable. He or she can also change the terms, including the choice of beneficiaries.
A successor trustee will manage the funds after the passing of the grantor. This trustee could be a professional trust administration entity like a bank or a trust company. If you go this route you know that the resources that have been conveyed into the trust will be handled properly.
The beneficiary or beneficiaries that you include in the trust agreement will take over the role after you pass away and receive monetary distributions from the trust. The nature these distributions will be decided by you when you draw up the trust agreement.
There is nothing inherently wrong with the probate process, and the powers that be do everything possible to make it as efficient as possible. However, when you consider all the facts you may indeed choose to avoid probate with a revocable living trust.