When a revocable trust is properly drafted and funded, it will avoid probate. This is the revocable trust’s most significant and valuable feature. The benefits of avoiding probate can be appreciated by understanding what occurs when an estate has to go through the probate process.

Should an individual die owning property that is not protected by a trust, a court supervises the property transfer to the people named in his will. If a person dies without a will, then his property will pass to his relatives in the manner proscribed by the laws of his state. The actual transfer of title to the decedent’s property is carried out by the court’s supervision by someone designated in the will as the Executor of the estate. Therefore, when a person dies without a will, the court will appoint an Administrator to proceed with transferring the decedent’s property. An Executor or Administrator is also known as a Personal Representative.

The Personal Representative has the following responsibilities to perform:

Locate, inventory, and appraise the decedent’s assets.

Pay all monies due to the decedent’s creditors.

Prepare and file federal and state death tax returns.

See to the distribution of assets of the decedent’s estate as directed by the decedent’s will or according to state law.

The Personal Representative usually hires an attorney to perform this work on his behalf. The attorney collects his fee from the estate for his services. The amount of legal fees, depending upon the state, is either at a fixed percentage of the estate or based upon what fee the judge determines to be reasonable.

The excuse that the majority of people do not want their estate to go through probate is because the probate process is expensive, time consuming, and inconvenient. The attorney’s fees may range from between 2 to 10 percent of the gross value of the estate.

Another reason is that attorneys may not feel the same sense of urgency about completing the probate that is felt by the decedent’s wife and children. While the decedent’s family desire to get on with their lives as soon as possible, oft times the estate’s attorney is often busy handling other matters, which means the time period for completing probate could take from two to five years. Therefore, probate can cause undue stress and frustration for the survivors, and avoiding the process is a legitimate planning concern.

Revocable trusts are only effective in avoiding probate when the trust document has been properly drafted, and only when all of the decedent’s property has been transferred into the trust before his death. The trust document, like a will, provides for disposing of trust assets upon the death of the settlor. The usual arrangement is that a husband and wife create a revocable trust with both the two of them as the initial trustees. They also become the beneficiaries of the trust. The trust provides that the trust may be revoked at any time during both their lifetimes. Upon the death of either spouse, the trust becomes irrevocable and the surviving spouse will become the sole trustee. When the surviving spouse dies, the trust property will pass on according to the desires expressed in the trust document.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.