REVOCABLE LIVING TRUSTS

"Probate" is a judicial proceeding - a lawsuit, if you will - to establish the authenticity of a decedent's last will and testament, to determine any claims which may exist by or against his or her estate, and to provide for the distribution of the assets of his or her estate "after the dust settles." There are many aspects of probate which many people dislike, and a Revocable Living Trust is generally the best way to avoid probate.

What is a Trust?

A trust is an agreement between one individual - the Donor - and at least one other individual - the Trustee - whereby the Donor transfers property to the Trustee and whereby the Trustee promises to manage the property for the benefit of the Donor during the Donor's lifetime, and on the death of the Donor, for the benefit of a one or more other persons designated by the Donor.

A "Living" Trust is created and funded during the lifetime of the Donor. It is distinguished from a "testamentary" trust, which is adopted as part of the Donor's last will and testament, and which does not take effect until the Donor's death. A "revocable" Trust is just that: it can be amended or terminated by the Donor at any time. Generally, Trusts adopted for the purpose of avoiding probate may be freely revocable, which means that the Donors retain complete control over their property during their lifetimes.

How does a Trust work to Avoid Probate?

Because the Donor has transferred ownership of certain property to the Trust, his or her death has no effect upon the ownership of the property. In legal theory, the Trust owned the property before the Donor died, and it still owns the property after he or she died. The Trustee is under contractual obligation to execute the Trust agreement, which commonly requires him or her to distribute the property to the Donor's children - without a probate proceeding ever being filed!

Why Avoid Probate?

Cost is the primary consideration. If you will take a look at the Services/Fees page of this Website, you will see that the minimum cost of legal services for a probate can be about three times what it is for a living trust, and that does not include court costs and the cost of publishing notice. Also, probate records are public, while a trust is private. A trust can be administered more quickly than probate, because there is less paperwork and probate involves a four-month waiting period following the publication of notice.

Are there other Advantages to Living Trusts?

Yes. Your successor Trustee can take over in the event of your incapacity, which will save considerable expense, because otherwise a conservatorship could become necessary. Also, if you own real property in other states, transferring those parcels to your Living Trust can avoid the unpleasant surprise of ancillary probate in each of those states!

Are there any Disadvantages to Living Trusts?

Yes. The primary disadvantage to a Living Trust is that in order for it to be effective, certain assets must be transferred to the Trust and they must remain in the Trust until the Donor dies, or the purpose of the Trust is defeated and the Donor's estate will have to be probated anyway. It has actually happened in one case that a client set up a Living Trust, transferred her residence to the Trust; but later she sold her residence and placed the proceeds in a brokerage account in her individual name! When she died, we probated her estate, because the proceeds were not in the Trust.

Also, the initial cost of a Living Trust is greater than that of a simple will.

Are there Advantages to Probate?

It's' hard to think of any - at least, from the perspective of the client engaged in planning his or her estate. The only advantage to probate I can think of is court supervision, which is an advantage only if you are unhappy about the identity of the person nominated as personal representative - and you are the one who makes that nomination.