There is much more to estate planning than simply deciding who will receive your estate assets when you are gone. Although the primary goal of your estate plan may be to provide for loved ones in your absence, there are typically a number of additional inter-related goals that must be incorporated into an estate plan. Probate avoidance is one of the most common of those additional goals. With that in mind, the Hauppauge trust lawyers at the Law Offices of Kobrick & Moccia explain the benefits of using a trust to help your estate avoid probate.
Why Is Probate Avoidance Important?
After your death, the assets that make up your estate must eventually be transferred to their new owners. Probate is the legal process by which those assets are identified, located, valued, and eventually distributed to the intended beneficiaries and/or legal heirs of the estate. There are, however, a number of steps in the probate process that must be completed before those assets can be released to the new owners. Although the probate process is unique for every estate, common steps in the process include:
- Identifying, locating, and valuing all estate assets.
- Categorizing assets as probate or non-probate assets.
- Opening the probate of the estate by filing a petition, along with an official death certificate, in the appropriate court.
- Notifying creditors of the estate that probate is underway.
- Identifying, locating, and notifying beneficiaries and/or heirs of the estate that the estate is being probated.
- Reviewing and approving or denying creditor claims.
- Prioritizing and paying approved claims.
- Selling assets, if necessary, to pay creditors.
- Defending any challenges to the Will or litigating any claims made by creditors that were denied.
- Calculating any paying federal (and state, if applicable) gift and estate taxes
- Effectuating the legal transfer of the remaining assets to the named beneficiaries and/or legal heirs of the estate.
As you can well imagine, getting an estate through the probate process takes a considerable amount of time. Even a relatively modest estate that does not run into complications during probate will take a minimum of eight months to probate because creditors are allowed seven months to file claims against the estate. Assets that are part of the probate process cannot be released to the intended beneficiaries or legal heirs of the estate until the end of the probate process. Furthermore, everyone involved in the probate process is entitled to a fee, including the Executor, attorneys, accountants, and appraisers. The time it takes to get through probate, coupled with the expenses associated with probate, are strong motivations for including probate avoidance strategies in your estate plan.
What Is a Trust?
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. A testamentary trust is one that activates upon the death of the Settlor via a provision in the Settlor’s Last Will and Testament in most cases. A living trust activates as soon as all formalities of creation are in place. Living trusts can be further divided into revocable and irrevocable living trusts.
How Does a Trust Help with Probate Avoidance?
Not all assets are required to go through the probate process. Assets held in a trust, for example, are non-probate assets. One popular strategy that can significantly decrease your estate’s exposure to probate is to create a revocable living trust and transfer the majority of your assets into the trust. By naming yourself as the Trustee, you continue to control all the trust assets while you are alive; however, upon your death, those assets are handled outside of the probate process. You can use the trust terms that you create to direct the distribution of the trust assets immediately following your death or you can name someone as the successor Trustee and allow some, or all, of the assets to remain in the trust until such time as you wish them to be distributed. Unlike a Last Will and Testament, a revocable living trust can also serve as an incapacity planning tool as well as a method for protecting the inheritance of a minor child.
Contact Hauppauge Trust Lawyers
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about trust and/or probate avoidance, contact the Hauppauge trust lawyers at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.