Probate is the legal process by which a person’s property and assets are allocated by the court system upon his death. Only property that is solely owned by the deceased person, not held in a trust, and not already designated through a will is subject to the probate process. Life insurance policies are also not subject to probate.
In a living trust, a person who owns property, the grantor, gives legal title for that property to herself or another person, called the trustee. It is similar to a will but since the grantor can be her own trustee, she can control all her property and its allocation and management while still alive. Property held in a living trust is not subject to probate upon the grantor’s death.
Drawbacks of Probate
Probate can be a very long, costly and sometimes even emotionally trying process for the surviving potential beneficiaries of the deceased. Since any assets going through probate will first be allocated to pay off any debts or obligations, including court and legal representation fees, the beneficiaries may not receive as much or anything at all from the deceased. FindLaw.com estimates that after taking months to complete, 5 percent of the estate has already been used to pay court fees and costs.
Living Ttrust Advantages
Living trusts allow the grantor to avoid probate for the assets listed in the trust. The trust outlines who will be in charge of managing the estate while the grantor is alive and automatically transfers property to designated beneficiaries upon death. It is a cheaper and quicker process. If the living trust is revocable, it can be changed at any time by the grantor. The last legal draft will be executed at the time of the grantor’s death.
When a person does not leave a will or establish a living trust, a probate courts will appoint a person to manage the allocation process (an executor) and, for the most part, distribute the deceased’s assets in accordance with state law after debts are paid. However, some beneficiaries may contest the court’s decisions and argue that their relationship with the deceased or some other factors entitle them to more of the estate. This often drags out the probate process even longer and results in long, costly and emotionally charged court proceedings. By avoiding probate, a living trust avoids this potential problem altogether.
Need for Living Trust
If a person is not concerned about his heirs arguing over allocation upon his death, does not own property, and has a legally established will, then a living trust may not be necessary. However, if a person owns a significant amount of property that is only one part of a vast estate, then a living trust will avoid costly probate proceedings for his heirs.
Creating Living Trusts
If the grantor’s estate is not overly complex and does not involve many parcels of property, a lawyer may not be necessary to establish a living trust. Basic living trust forms can be found online and will be valid provided they are properly filed with the court.
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