Have you heard ominous things about the probate process? Its reputation certainly has spread, but many do not know exactly why probate is often something many look to avoid. For starters, consider the prospect of facing what can be a complex and convoluted legal process in the wake of losing a loved one. Not that appealing, right? After a loved one passes away, the probate of their estate will follow. It can take a long time to resolve, resulting in the delay of inheritance distributions. It can also be quite expensive when you consider court fees and other legal fees associated with the process. Because of this, many look to spare their loved ones the ordeal of probate and put estate planning tools in place in the hopes that they can avoid probate in whole, or at least in part. One popular tool implemented in estate planning in order to avoid probate is the revocable trust.
Does a Revocable Trust Help Avoid Probate?
Yes, a revocable trust can help avoid probate. It must, however, be properly established and funded in order for this to be accomplished. To set up a revocable trust, the trustor creates the trust and appoints a trustee to manage the trust. The trust is to be managed for the benefit of the named trust beneficiaries in accordance with the trust document.
Establishing a revocable trust will not, in and of itself, be enough to help avoid probate. The trust must be properly funded. A wide variety of asset types can be used to fund a trust. Trusts can be funded with real property, financial accounts, and securities, among other things. In order to properly fund the trust, however, ownership of the asset must be transferred to the trust itself. In other words, property owned under your own name must now be owned under the trust’s name. This will require proper retitling of assets you wish to transfer to the trust. Once effectively transferred into the trust, the assets held in the trust will avoid probate. These assets will fall outside of the probate estate of the decedent because they are technically owned by the trust, and not in the name of the decedent.
There are also other ways to avoid probate in addition to the use of a revocable trust. Lifetimes gift-making is one way. Making accounts, such as banking accounts, payable on death accounts with a named beneficiary is another way. Upon the death of the account holder, the named beneficiary will automatically gain access to the account with no need to wait or go through the probate process. Additionally, real property titled as joint tenants with rights of survivorship will also pass outside of probate with the decedent’s interest in the property passing automatically to the surviving owner.