Estate planning typically involves trying to achieve numerous goals and objectives in one comprehensive plan. One of the more common estate planning goals is probate avoidance. There are several things you can do within your estate plan to help you avoid probate. Using a living trust to distribute the majority of your estate is one way to help your estate avoid probate.
What Is Probate?
The estate you leave behind includes both real and personal property as well as both tangible and intangible assets. Probate is the legal process that many of those assets must go through before eventually being transferred to the intended beneficiaries and/or legal heirs of the estate. Probate is also used to identify, locate, and value those assets as well as to notify creditors of the estate and provide them with the opportunity to file claims against the estate. In addition, any taxes owed to Uncle Sam and/or to the state for gift and estate taxes must be paid during probate. Finally, if a Last Will and Testament was executed by the decedent prior to death, probate also authenticates the Will, or in the alternatives, provides the legal forum for contesting the authenticity of the Will.
Why Is Probate Avoidance Such a Common Goal?
Probate avoidance is a common estate planning goal for several reasons. If your estate goes through formal probate, the terms of your Will become public record. By avoiding probate you can keep details regarding the distribution of your estate private. Because probate can take months, even years, to complete, it can also delay the distribution of the assets gifted to loved ones. Finally, probate can be expensive. Everyone involved in the probate of an estate is entitled to a fee for their services which typically diminishes the value of the estate, meaning your loved ones may receive less than what you intended.
Can a Living Trust Help My Estate Avoid Probate?
A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, as the name implies, does activate during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
A living trust helps your estate avoid probate because assets held by the trust are considered “non-probate” assets. Before the probate process begins, all estate assets must be categorized as probate or non-probate assets. Only those assets that are considered probate assets go through the probate process. As non-probate assets, the assets held by the living trust you created can be distributed to the named beneficiaries outside of the probate process at any time. Consequently, assets can reach your loved ones as soon after your death as you wish. The terms of your living trust will also remain private because the trust is not required to go through probate. Finally, the ability to stagger the inheritance left for loved ones is yet another common reason people give for choosing to use a living trust as their primary mechanism for the distribution of their estate assets.
If you think a living trust might be right for your estate plan, talk to your estate planning attorney about getting started with the creation of a trust.
Contact Sacramento Living Trust Attorneys
Please download our FREE estate planning checklist. If you have additional questions or concerns about using a living trust to avoid probate, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.
- Living Trusts and Incapacity Planning - March 31, 2020
- Estate Planning and Charitable Giving — Key Points - March 29, 2020
- Over-Funding Your Retirement Plan: A Potential Estate Planning Problem - March 27, 2020