Probate is the legal process of transferring ownership of probate assets after a death. As described in the previous section, a probate asset is an asset such as a bank account, stock certificate, or home in the name of the deceased person alone. If a person dies owning probate assets, a legal proceeding in the Probate Court is necessary to transfer probate assets to the individuals named in the decedent's Will.
A probate proceeding can be a lengthy, public, and expensive court action. First, an executor must be appointed. This requires the filing of a petition and accompanying documents with the Probate Court and publication of a notice in a local newspaper. Once an executor is appointed, an estate inventory must be filed with the Probate Court. Creditors have an opportunity to file claims against the estate and an accounting must be filed to properly close out the estate. All of the documents filed in connection with the typical estate are a public record and can be viewed by anyone who requests the file at the courthouse.
Estate proceedings take at least one year to complete. The cost of a full probate proceeding can vary greatly depending on its complexity, the nature of the probate assets, the circumstances and relationship of the surviving family members, and many other factors. It is not at all uncommon for relatively simple estate proceedings to cost several thousand dollars.
A Trust is one of the tools that can be used to avoid probate. A Trust is an agreement between the person or people creating the Trust and the person or people who are entitled to benefit from the Trust. The person who creates a Trust is called the “Donor.” The person who is entitled to benefit from the Trust is the Trust's “Beneficiary.” A Trust also names a “Trustee.” The Trustee is responsible for control of any assets transferred to the Trust and manages those assets for the Trust Beneficiary. A Trust can have more than one Donor, more than one Trustee, and more than one Beneficiary.
An important thing to keep in mind is that any assets transferred to a Family Revocable Trust will avoid probate at death. Assets payable to the Trust at death, such as life insurance policies, will be managed as part of the Trust for the benefit of whoever is selected according to the terms of the Trust. With a properly drafted and implemented Trust, you can avoid probate, have assets managed during your children or parents lifetimes, if necessary, and have a structured distribution. These Trust benefits provide surviving family members with enhanced financial stability, as well as lower estate settlement costs.
A Family Revocable Trust is one example of how a Trust is used. Depending on an individual's age, family circumstances, asset structure, and health, some benefits of a Trust may be more important than others. You can only determine whether a Trust is an appropriate estate plan vehicle for you after consulting with an experienced estate planning attorney.
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