THE LIVING TRUST:
AVOID PROBATE WHILE MAINTAINING TOTAL
MANAGEMENT AND CONTROL OF ASSETS

A revocable living trust is a method of totally avoiding the probate process.  If assets are owned by a trust, no court is involved in the transfer of assets upon death.  Therefore, no newspaper notice or letters to heirs are required, no records become public, and no statutory waiting periods apply.   It is still necessary to determine what assets exist, to pay creditors, to file required tax returns, and to distribute assets to beneficiaries, but avoiding court proceedings and requirements simplifies and can expedite the process.

Probate only arises when the legal owner of property dies, leaving no joint owner or beneficiary.  In order for a living trust to avoid probate, ownership of assets is transferred to the trustees (managers) of the trust.  Instead of owning property as Jim and Jane Smith, the name on the deed, account, security or other asset is changed to “Jim Smith or Jane Smith” as trustees, or successor trustee(s) of the SMITH TRUST dated _____________________.”
 

The trustees of the trust own the property.   Jim and Jane, as trustees of the trust, have total control over all property just as they did before.  Jim and Jane could spend money, mortgage, sell or give away assets, or do anything they would do if the trust did not exist.  Since the trust owns the property and it is physically impossible for the trust to die, the owner of the property never dies and probate is never required.  If either Jim or Jane pass away, probate is avoided and the trust remains as it was before.  In most cases, the survivor, either Jim or Jane, still has complete control over the property.  The only exception to the surviving spouse receiving total control of all property is if those setting up the trusts choose to have someone else manage it or if federal estate tax planning is included in the estate plan.

Upon the death of the survivor, no probate is required since the trust is still the legal owner of the property.  According to the provisions of the trust agreement, when both Jim and Jane are deceased, the party they named as successor trustee will have the power to distribute the property of the trust according to the terms provided in the trust.  The successor trustee is typically the same person or institution who would be named as personal representative in a will.  This should be someone who is capable of completing paperwork, who is responsible with money, and who can get along with the named beneficiaries.  The successor trustee can be one of the named beneficiaries, any other individual, or a bank or trust department.  If the original owners of the property, during their lifetime, decide that they prefer to have someone else manage assets, the role of primary trustee of their trust can be given to anyone they choose.  If both spouses agree that only one spouse should have management rights on some or all assets, the trust agreement can provide for management solely by one spouse.

A living trust works well for either married or single people.  Joint trusts may be used in situations where joint tenancy would typically be used, but where probate avoidance on both estates is desired.  In cases where married couples choose to keep their assets separate, such as when spouses have children from previous marriages or in some cases to implement federal estate tax planning, a separate living trust can be executed by each spouse, with the plan of distribution of each spouse outlined in that spouse’s trust.

A Living Trust is an estate planning document which:

• Avoids probate of the estate, so no court is involved
• Eliminates the requirement of public notices in a newspaper
  
• Keeps your plan of distribution private
  
• Is acceptable in all states, so avoids probate of out-of state property as well as property located in the state of residency.  (A will requires probate in each state where real estate is owned and in the state where the deceased lived on the date of death)
  
• Provides for management of assets by a family member or an institution (whichever you select) if you are unable to manage assets due to health problems and avoids proving incompetency in a court proceeding
  
• Helps in organizing lists of assets for personal financial planning and helps beneficiaries in locating assets
  
• Allows for optimum tax planning using federal and state income, gift and estate tax law, yet requires NO extra tax returns or filings
  
• Does not affect your ability to manage and control your own property and does NOT require management fees to be paid to anyone unless you wish to appoint an outside manager
  

As with all estate planning, each person’s individual situation and wishes must be analyzed before a decision is made as to the most effective planning technique.  In considering living trusts or other probate avoidance and estate planning techniques, it is very important that a professional knowledgeable about living trusts be consulted.  Just as an obstetrician may not be the one to do heart surgery, all attorneys are not familiar with the most effective methods of using living trusts.

Living trusts may not be for everyone, but for many people a bit of extra planning now in setting up a living trust can save much time, money and frustration for their loved ones in the future.  Estates take a lifetime to create, and should be protected as much as possible!  If you have questions about Trusts contact us.