What is probate and how does it affect my estate?

Categories: Asset Protection, Estate Planning, Probate, Trusts, Wills

As many recent events show, sooner or later, we all die. And hopefully, death comes as sweetly as possible in our sleep at night, but just as often it comes unexpectantly.

However, from a legal standpoint, the fact that a person has died, even if they have left a will, does not clear away the issues from the estate they held.

A probate attorney, also referred to as an estate planning lawyer, usually drafts a will for an individual, and as a part of the will, someone will be named as the executor of the estate.

The executor, then replies for a grant of the probate court, a legal document that grants the executor the ability to pay taxes and all legal debts from the estate, as well as to distribute inheritances from the estate to those named in the will.

The big problem with probate court is that there are plenty of people that die every single day and so as a result, probate can take nearly a year to complete. And the process can take even more time if there are disputes in the will, there appears to be more than one will, one of the major beneficiaries is in another country, or any other complications that can arise.

In addition to being slow, the probate court experience can be costly and everything is public, which in the case of large estates, and closely held enterprises, many parties have a desire to avoid.

Avoiding probate court

One method of avoiding probate court is to establish bank accounts that are payable upon death to beneficiaries.

Such bank accounts are payable to designated heirs without going through probate court.
And in a few states, the transfer of real estate can be arranged by hiring an estate planner at a law firm.

Simply do a Google Search either for an estate planning attorney near me or estates lawyers near me to be sure you are on the right track.

However, since the bulk of many individuals’ assets does not go into bank accounts, and because only a few states allow the transfer of real estate after death, most individuals rely on the one sure way of avoiding probate and that is establishing a living trust.

How does a living trust work

A living trust, set up for you by an estate planning attorney, is a document that allows you to put assets you own into a living trust.

Say, for example, you own a house in Los Angeles, a vacation retreat in Big Bear California, and businesses in San Diego and Orange County.

By naming yourself as the trustee of your living trust, you can put all of these properties and businesses into the living trust if you prefer, but now you own these properties as trustee of your trust.

You still own all the properties and can sell them as you will, but as an example, if you sell your vacation cabin in Big Bear, instead of signing the deed with your name, you would sign it as “trustee of the John Doe Revocable Living Trust dated January 2, 2018” or whenever the trust was established.

With a living trust, you can name in the declaration of the trust any future owner of any of your properties or businesses after your death, and you have the right, should you choose, to change your mind and rename new people at any time.

Say for example, that at the ripe age of 75, you find the love of your life and decide to get married again. You can then simply go into your estate planning attorney and have the document changed to name her as the primary beneficiary of your estate.

In addition, for whatever reason, perhaps because you simply want to change everything entirely, you can revoke your trust at any time and then start a new one if you change.

Once a living trust is established, there are very few recordkeeping or tax documents necessary. If you sell a part of your trust, you would declare it on your personal taxes, but you needn’t fill out separate tax paperwork for the trust.

In your living trust, naturally, you will name a successor to yourself after you die, who will make serve much like the executor of your will would, to distribute your estate according to your wishes in the trust.

The advantage of a living trust, as far as you are concerned, is that after your death, the successor to the trust can distribute your assets in a month or so as compared to a year or so with probate.

To hire an estate planning attorney or not?

Certain well-meaning “experts” will often advise that setting up a living trust is no more difficult than creating a will. All you need is the right software and voila, instant trust.

However, there are many reasons you should consider hiring an estate planning lawyer to create your living trust.

One reason is that most estate planning software does not cover the many exceptions that crop up in real life to create a living trust.

Your needs are likely to be unique, particularly if you have a lot of beneficiaries or want to have specific instructions in your trust to follow upon your death.

In addition, attorneys can assist with further documentation needed to transfer property out of the trust such as real estate sales.

Also, even if you have a living trust established, if the wording is not clear, the case may be thrown into probate anyway.

Finally, when you have an estate planning attorney draft your living trust, you can relax and have the peace of mind that everything is proper and your wishes and intent are clearly established.