Avoiding Probate With Revocable Trusts
When properly drafted and funded, a revocable trust will assist in avoiding probate. This is the most significant and valuable feature of the trust. The benefits of avoiding probate can be further appreciated through understanding what happens when an estate is forced to go through the probate process.
Should a man pass away, and he owns property unprotected by a trust, then a court will supervise the property transfer to the persons whom he named in his will. But, if this same person dies without a will, then his property will wind up being passed on to his relatives in a manner that is proscribed by the laws of his state. The transfer of title to the decedent’s property would be carried out by the court’s supervision by an individual that the will designated as the estate's Executor. So, when someone dies without a will, the court appoints an Administrator to proceed with the transfer of all the decedent’s property. Both Executor or Administrator are also known as a Personal Representative.
The Personal Representative performs the following responsibilities:
Locate, inventory, and appraise assets of the decedent.
Pay off all debts owed to the decedent’s creditors.
Prepare and file both federal and state death tax returns (if any).
Ensure that the assets of the decedent’s estate as are distributed as specified in the decedent’s will or according to state law.
The Personal Representative will usually hire an attorney to perform this work. The fee for the services rendered by the attorney will be collected from the estate. This amount, which varies from state to state, is either at a fixed percentage of the estate or is based upon what the judge believes to be a reasonable fee.
The reason why most people do not want their estate to go through probate is due to the fact that the probate process is expensive, takes a long time, and is inconvenient. This, and the fact that an attorney’s fees may range from 2 to 10 percent of the gross value of the estate.
Another pertinent reason is that many attorneys do not feel the same sense of urgency about the completion of probate felt by the decedent’s wife and children. While the decedent’s family may want to move on as soon as possible, the attorney handling the estate is often busy handling other matters, which means the time involved in finishing probate could take between two to five years. Thus, probate could cause stress and frustration for the survivors, and the avoidance of the process is a legitimate planning concern.
Revocable trusts are effective in avoiding probate only when the trust document has been properly drafted, and only then when all of the decedent’s property has been transferred into the trust prior to his demise. The trust document, just like a will, will provide for disposition of trust assets upon the settlor's death. The usual arrangement is that a husband and wife will create a revocable trust with both of them as the initial trustees. They will also become beneficiaries of the trust. The trust will also provide that it can be revoked at any time during both their lifetimes. Upon the death of either spouse, the trust will become irrevocable, and the surviving spouse becomes sole trustee. When the surviving spouse dies, the trust property then passes on according to the wishes that are expressed in the trust document.
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