Today, many people use a revocable living trust instead of a will, joint ownership, or beneficiary designation as the foundation of their estate plan. When properly prepared, a trust avoids the costly public, and often time-consuming, court processes of conservatorship or guardianship (due to incapacity) or probate (after death). Still, many people make one big mistake that sends their accounts and property—and their loved ones—right into the court system: They fail to fund their trust.

What Does It Mean to Fund Your Trust?

Funding a trust is the process of transferring ownership of your accounts and property from you as an individual to yourself as the trustee of your trust. Although the trust will technically own the accounts and property after the transfer, you will maintain control over them as the trustee. You will also continue to be able to benefit from those accounts and property as the primary beneficiary while you are living.

Funding a trust is accomplished in several different ways:

• Changing the title of your accounts and property from your individual name (or joint names if you are married) to the name of your trust—for example, from John Smith to John Smith, Trustee of the John Smith Living Trust, dated June 1, 2020
• Assigning your ownership interest in nontitled property (such as artwork, jewelry, collectibles, or antiques) to your trust through an Assignment of Personal Property
• Assigning your ownership interests in a limited liability company or other business entity by executing the right paperwork, such as an Assignment of Membership Interest, Stock Transfer Agreement, or a similar document, depending on the type of ownership and applicable state law
• Changing the primary or contingent beneficiary of an account or property to your trust

What Happens to Accounts and Property Left Out of Your Trust?

For many people, avoiding a conservatorship or guardianship during their lifetime and probate at their death are the main reasons they set up a revocable living trust. You may believe that once you sign your trust agreement, you are done. However, if you then fail to change titles and beneficiary designations for your accounts and property before becoming incapacitated or dying, those accounts and property—and your loved ones—may end up in probate court.

Which Accounts and Property Should (and Should Not) Be Funded into Your Trust?

In general (but with some exceptions), you should consider funding the following into your trust:

• Real estate (homes, rental properties, vacant land, and timeshares)
• Bank and credit union accounts (checking, savings, CDs, money market accounts)
• Safe deposit boxes
• Investment accounts (brokerage, agency, custody)
• Notes payable to you
• Business interests (limited liability companies, corporations, partnerships)
• Intellectual property
• Oil and gas interests
• Water rights or shares (especially in some states where they can be quite valuable)
• Personal effects (artwork, jewelry, collectibles, antiques)
• Collector cars
• Digital accounts and cryptocurrency (if possible)
• 529 plans (Note that some plan administrators do not permit the transfer of existing 529 plans to a trust but may permit opening a new 529 plan in the trust’s name. If transferring the account to the trust is not an option, be sure to designate a successor custodian to take over if the primary custodian becomes incapacitated or dies.)

You should avoid funding certain assets into your trust during your lifetime, but you may want to consider funding them into your trust upon your death by beneficiary designation, including the following:

• Life insurance policies
• Individual retirement accounts, 401(k)s, and other tax-deferred retirement accounts

Last, you probably should not, or may not be able to, fund the following into your trust during your life or at your death:

• Interests in professional corporations
• Foreign accounts or property:In some cases, funding non-US accounts or property into a US-based trust can cause adverse tax consequences. In other cases, trusts (even US trusts) are not recognized or are ignored due to the other country’s own laws.
• Uniform Transfers to Minor Act (UTMA) and Uniform Gifts to Minor Act (UGMA) accounts: Your minor child is the owner of the account, and you (as the person who set up the account) are merely the custodian. Name a successor custodian in case you become incapacitated or pass away to ensure continuity of management without changing ownership.
• Everyday automobiles and other low-value vehicles: Many states have a process for transferring a vehicle outside of probate without funding them into a trust.

While these recommendations should serve as basic guidelines, it is important to remember that there are no hard-and-fast rules with trust funding. Work closely with us to determine what should go into your trust and what should stay out. Also, when acquiring new accounts or property, call us to find out how to title the account or property or whom to designate as the beneficiary.

What Are the Benefits of Funding Your Trust?

Funding your trust makes it possible to obtain the best results from your trust-based estate plan.

• Your trustee, instead of a conservator or guardian selected by a judge in a public court proceeding, will take control of your accounts and property if you become unable to handle your financial affairs, ensuring that you are cared for in the manner you expect, by the person you selected, and according to the instructions you have included in the trust.
• Your trustee will take control of the trust’s accounts and property after your death, managing and distributing them to your chosen beneficiaries when and how you have determined, without probate court involvement.
• Because your trust governs all the accounts and property it owns (or that will transfer into it by beneficiary designation upon your death), you only need to update the trust agreement as your wishes and circumstances change. This comprehensive approach will be much easier than managing an estate plan built piecemeal with probate-avoidance tactics such as joint ownership, payable-on-death or transfer-on-death accounts, and individual beneficiary designations.
• Under most circumstances, your trust does not need to be filed with the probate court unless it is contested, allowing details of your accounts and property and your final wishes to remain private. In contrast, any accounts or property not held in a trust, that are not jointly owned, and that do not have a designated beneficiary will, in most cases, need to go through probate, a court process where all your private details are made a part of the public court records and are accessible to anyone.

The Bottom Line on Trust Funding

Many people appreciate the cost and time savings as well as the added control over their money and property that a trust offers. Yet in the end, an unfunded trust is not worth the paper it is written on. We are available to answer your questions about funding your trust and look forward to working with you and your advisors on all of your estate planning needs.

The bad news: When a person dies owning property in their sole name without a beneficiary, their loved ones will have to go through a court-supervised process called probate to transfer the property out of the deceased person’s name and into the name of intended beneficiaries or heirs at law. Going through probate court may lead to various expenses, including fees for attorneys, executors, appraisers, accountants, court filings, and other costs required by state law. Depending on the probate’s complexity and the estate’s value, fees can easily run up to tens of thousands of dollars in some states.

The good news: Many costs can be reduced by avoiding probate altogether. It is that simple. Here are three ways to avoid probate and its related costs.

1. Name a beneficiary. The probate process applies only to accounts and property in a person’s sole name that do not have a beneficiary, payable-on-death (POD), or transfer-on-death (TOD) designation at the time of their death. Accounts and property with a beneficiary designation will be transferred to the designated individual immediately upon the owner’s death without any probate court involvement. It is common to designate beneficiaries on these types of accounts and property: 
   • Life insurance policies
   • Annuities
   • Retirement plans
   • Real estate (if available in your state)

Caution: When someone is named as a beneficiary of an account or piece of property through a beneficiary designation, they will receive that account or property outright and without any strings attached. This means it could be exposed to claims by the beneficiary’s creditors, judgments, or a divorcing spouse. Naming a beneficiary also means giving up the ability to put restrictions on how the beneficiary uses the account or property they receive. Lastly, naming a beneficiary does not help if you become unable to manage your affairs. The named beneficiary will only have access to the account or property at your death and not during your incapacity. You will have to rely on a financial power of attorney or a court-appointed conservatorship or guardianship to manage the account or property if you are unable to.

2. Own accounts and property jointly. Probate can also be avoided for accounts or property you own if they are held jointly. Similar to a beneficiary designation, joint ownership automatically transfers the deceased co-owner’s share to the surviving co-owners immediately upon the person’s death without the need for probate court. There are several types of joint ownership that you can set up to avoid having to go to probate court to transfer a co-owner’s interest:
   • Joint tenancy with rights of survivorship. With this type of joint ownership, a deceased co-owner’s interest in the property simply transfers to the remaining joint tenants (co-owners) upon the deceased co-owner’s death.
   • Tenancy by the entirety. This is a special form of joint tenancy with a right of survivorship only available to married couples in some states.
   • Community property with rights of survivorship. This form of ownership is used with property owned by a married couple in a community property state. At the first spouse’s death, the surviving spouse receives 100 percent ownership of the accounts and property determined to be community property.

State laws play an important role here. We can help you determine which form of joint ownership, if any, is a good fit for you.

Caution: As with beneficiary designations, adding a joint owner to your accounts or property can subject the accounts or property to claims asserted by the new joint owner’s creditors, judgments, or divorcing spouse. This vulnerability begins the moment they are added to the account or property, rather than after your death, which means that your new joint owner’s creditors could seize your accounts or property while you are still alive. (One exception is when property is jointly owned by spouses as tenants by the entirety. This type of ownership can protect the property from creditors trying to collect on just one of the spouse’s debts.)

3. Create and fund a revocable living trust. A final method (and one estate planners recommend most often) to avoid probate and all its expenses is to create and fund a revocable living trust. When you create a trust, you will need to transfer the ownership of all your accounts and property to the trust or name the trust as the beneficiary. The process of transferring assets to a trust is called trust funding. The accounts and property owned by the trust (or that become owned by the trust by beneficiary designation) are not probate assets and do not require probate court involvement. While you are alive, you remain in control of all legal decisions pertaining to the accounts and property owned by the trust as the trustee and retain the enjoyment of those accounts and property as the current beneficiary. After your death or if you become unable to manage your affairs, your named successor trustee will step in to manage and distribute the trust’s accounts and property according to your wishes. A trust works well if it is properly created and funded by an experienced estate planning attorney.

We Have the Tools to Help You

If you are interested in creating a plan for you and your loved ones that keeps you out of probate court and avoids all the expenses that go with it, contact our office today to schedule your appointment. As an added convenience for our clients, we can hold our meetings through video conferencing or by phone if you prefer. We are here to help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.

After a loved one dies, their money and property that goes through probate must be distributed to the people legally entitled to it, either according to a last will and testament (also called a will) or the state’s default distribution scheme (found in its intestacy statute). While most people want the settlement process done as soon as possible, probate can take up to 12 months in some states. The time delays create unnecessary stress, especially for families who need access to those accounts or property to pay their deceased loved one’s taxes, expenses, or legally valid debts.

5 Reasons Probate Takes So Long

Here are five of the most common reasons the probate process may take so long: 

1. Paperwork. Probate involves extensive paperwork, including inventories, financial records, court filings, and responses to creditors and beneficiaries. Managing all these documents can be a monumental undertaking.  

2. Complexity. Estates with numerous or complicated accounts or property take longer to handle during the probate process. For example, real estate in multiple states, closely held business interests, or unique collectibles often require appraisals, specialized paperwork, and coordination with various professionals.

3. Probate court caseload. Many probate courts have large caseloads and limited staff. Because the court must be involved at various stages of the probate process, there may be delays in getting authorization to move the process forward. 

4. Challenges to the will. Family members, heirs, beneficiaries, and those who thought they would be beneficiaries can object to and challenge the will’s instructions and legal validity. While state law dictates the length of time a person has to object, will challenges can often add years and significant costs to the probate process. Some of the most common challenges include assertions that the willmaker, at the time the will was signed, was

• lacking testamentary capacity (lacking the mental ability required by state law to make a will);
• subject to undue influence (someone wrongfully pressured them to do something they would not have otherwise done); or
• a victim of fraud (they thought they were signing a different document, not a will).

5. Creditor notification. The deceased person’s creditors must be notified of the deceased person’s passing and the opening of their probate estate to give the creditors an opportunity to submit any legal claims for debts. Once this period expires, any future claims would be barred in most states. The period for creditors to file claims varies by state, but typically ranges from three to nine months.

While most state laws are designed to keep the probate process moving along in a timely manner, that is not always the reality. 

Simply Put, Avoiding Probate with a Trust Is Better

Simply put, creating a trust to hold accounts and property can avoid the long, complicated probate process. When a person creates a trust and funds it by transferring all of their accounts and property into it, those accounts and property are treated as being owned by the trust rather than the deceased person, which means they do not need to go through the probate process. Their distribution is controlled instead by the instructions in the trust agreement. Administering a trust instead of going through the probate process is usually quicker—meaning beneficiaries receive their inheritance much sooner (depending on the trust’s instructions). In addition, costs can be reduced and stress levels minimized, and the trust can be administered away from the prying eyes of the probate court and the public. 

Take Action Now

If you need help administering your deceased loved one’s probate estate, we can help you move the process along. We can also help you ensure that you never burden your loved ones the way you have been burdened: We will show you how to avoid probate with a trust. Give us a call today.

When creating a last will and testament (commonly known as a will), one of your most important considerations is who to choose to serve as the executor (also called a personal representative) of your estate.

As the name implies, the role of the executor is to execute the instructions that you provide in your will. You may give your chosen executor some discretionary powers in determining how your assets (money and property) are to be distributed, but they have limited latitude to make independent decisions. Any deviation from their specified powers could cause a conflict in your estate that leads to legal consequences.

To avoid any unnecessary complications in the settling of your affairs, take care to avoid ambiguous or unclear language in your will. If there are any doubts about your last wishes, the executor and beneficiaries may wish to consult with an estate planning lawyer to discuss next steps.

What Happens With Your Will When You Die

Upon the death of the testator—the person who made the will—probate will be opened if the testator died owning accounts or property in their sole name and without a properly completed beneficiary designation form.

Probate is the court-supervised process in which the testator’s will is validated and administered. The person named as executor in the will initiates and carries out the probate process. The probate process can vary slightly from state to state, but generally unfolds in the following manner:

1. The death certificate is filed with the court.
2. The testator’s will is submitted to the court and confirmed as valid.
3. A petition to initiate probate is filed.
4. The court gives the executor permission to gather, evaluate, and manage the testator’s assets.
5. The executor contacts beneficiaries to inform them that probate has commenced.
6. Lists of the deceased’s assets, debts, bills, and taxes are compiled and submitted to the court.
7. The testator’s outstanding debts and taxes are paid from the testator’s assets.
8. The remaining assets are distributed to the beneficiaries.
9. The estate is closed and probate ends.

These steps imply that the decedent has, in fact, left a will. Dying without a will—known as dying intestate—entails much greater court involvement. The court appoints an executor, identifies heirs, and determines who gets what. Dying intestate can even empower the state to choose the guardian of your minor children.

It may not be possible to avoid probate completely (e.g., if a guardian appointment is required for a minor child, if an executor must represent the decedent in a pending or new lawsuit, or if the decedent died with assets solely in their name and without a designated beneficiary). Probate duration and costs, however, can be reduced through careful estate planning.

Responsibilities of the Executor

The executor named in a will is responsible for carrying out the testator’s final wishes. The executor is a liaison between the probate estate and the probate court, as well as between the probate estate and the beneficiaries. Their duties include locating and valuing assets of the estate, paying debts, and distributing assets to beneficiaries in accordance with instructions in the will.

Executors owe a fiduciary duty to the estate and its beneficiaries that compels them to act in the best interests of both. Because an executor may also be a beneficiary of the estate, their actions may be scrutinized to ensure they are acting fairly and legally.

When an Executor Can Use Discretion

The executor must, to the best of their ability, carry out the directions expressly stated in the testator’s will. They cannot make changes to the will, but there are cases where the executor can use discretion when settling an estate. The testator might explicitly give discretion to the executor, or the need to exercise discretion may arise due to ambiguity in the will, as in the following examples:

• The will gives the executor wide latitude to decide when to sell the testator’s property.
• The will allows the executor to decide whether to convert assets to cash prior to distribution.
• The will states that “reasonable and necessary” repairs must be made to the testator’s home prior to its sale or distribution (words such as “reasonable” or “necessary” may be too vague and leave the executor confused about how to proceed).

If the will is unclear, the executor should seek clarification from the court to assist with interpretation. Anyone with a stake in the estate may also raise a legal challenge against the executor, asking the court to remove the executor or commencing probate litigation against them.

When a gray area exists within the provisions of the will and the executor acts in good faith and within the scope of their power and duties, the court may uphold their actions. A petition to remove an executor or a lawsuit against the executor for breach of fiduciary duty will only succeed if there is evidence of misconduct, such as the executor explicitly going against the will or estate’s interests, acting in their own best interest, or withholding an intended gift from a beneficiary.

Beneficiary Agreements to Change a Distribution

While the executor and beneficiaries cannot rewrite a testator’s will after the testator has died, the beneficiaries may be able to mutually agree to modify what they receive from the estate.

Making changes to distributions can be done using a document known as a nonjudicial settlement agreement. A nonjudicial settlement agreement is a contract that may be used whenever the beneficiaries agree that asset distribution should be different than what the will stipulates, including in these situations:

• As a strategy to minimize a beneficiary’s inheritance tax
• When the family wants to balance out unequal distributions among all beneficiaries
• To settle disputes about the distribution of assets

A nonjudicial settlement agreement can be a way to resolve a loved one’s legal challenge to the will. The court should respect this agreement if it meets applicable legal requirements. However, before signing an agreement to change the provisions of the will, the beneficiaries should consult with a probate attorney so they understand whether this type of agreement is legally recognized in their jurisdiction, along with what the implications and potential consequences would be.

Legal Guidance for Executors and Other Family Members

In addition to assisting with a nonjudicial settlement agreement, there are many issues related to probate that might require attorney assistance.

Executors, beneficiaries, and anyone who feels they have been treated unfairly in a will may need to consult with a probate attorney about interpreting and administering the will, determining their rights and duties under state probate law, and potentially challenging the will in court. In addition, when creating your will, it is crucial that you set out your intentions in a way that minimizes the potential for conflict among everyone involved.

Get legal help with a will or probate issue: contact our law office and schedule a consultation.

Ideally, when someone passes away, the paperwork and material concerns associated with the deceased’s passing are so seamlessly handled (thanks to excellent preparation) that they fade into the background, allowing the family and other loved ones to grieve and remember the deceased in peace.

In fact, the whole business of estate planning—or at least a significant piece of it—is concerned with ease. How can money, property, and legacies be transferred to the next generation in a harmonious, stress-free, fair process? To that end, many people strive to avoid burdening their loved ones with the complications and costs involved with probate.

There are numerous tools of the trade that a qualified attorney can use to keep your money and property out of probate, for example, establishing joint ownership on bank accounts and real estate titles, designating beneficiaries for life insurance policies and certain accounts, and so on. However, setting up a revocable living trust is quite often the best, most comprehensive option for avoiding probate. Let’s discuss why this is true.

What is a trust?

Often touted as an alternative to a will, a trust is a legal structure that owns your accounts and property or is named as the beneficiary of certain accounts and property (like a retirement account) and is managed by a trusted decision maker, also known as a trustee, on your and your beneficiaries’ behalf. A living trust is established while you are still alive, as opposed to being created upon your death. You can be the trustee for your own living trust until you are no longer able to manage your financial affairs or you pass away, at which point your chosen backup trustee, also known as a successor trustee, steps up and assumes the responsibility for managing the trust on your or your beneficiaries’ behalf.

How does a trust help you avoid probate?

The purpose of probate is to transfer property ownership for all accounts and property that are owned in your sole name and that do not have a beneficiary, pay-on-death, or transfer-on-death designation when you pass away. A trust can bypass this process completely because your accounts and property are either transferred to the trust while you are alive, or the trust is named as the beneficiary at your death. Therefore, when you die, there is nothing that needs to be transferred by the probate court (everything is already in your trust or was transferred to the trust automatically at your death). Furthermore, a trust can cover virtually any type of account or property, from real estate to heirlooms to stock to bank accounts. When a trust is structured correctly with the help of an experienced estate planning attorney, your affairs can stay out of probate court entirely. This process not only limits court costs but also maintains the privacy of your financial records while enabling your beneficiaries to enjoy the benefits of the trust without disruption or delay.

Establishing a trust can seem a bit complicated, and the process can cost a bit more initially than preparing a will. However, if you are willing to invest a little more up front, a trust can be your best option for avoiding probate later.  The key to effective planning that minimizes the likelihood of a drawn-out, contentious, expensive process is to work with highly qualified, trusted people. Find a lawyer who genuinely cares about you and your loved ones and who knows how to forge the right strategy for all of you. Give us a call today to learn more about the next steps for achieving the peace of mind you deserve.

When you pass away, your family may need to sign certain documents as part of a probate process in order to claim their inheritance. This can happen if you own property (like a house, car, bank account, investment account, or other assets) in your name only and you have not completed a beneficiary, pay-on-death, or transfer-on-death designation. Although having a will is a good basic form of planning, a will does not avoid probate. Instead, a will simply lets you inform the probate court of your wishes—your loved ones still have to go through the probate process to make those wishes legal. 

Now that you have an idea of why probate might be necessary, here are three key reasons why you may want to avoid probate, if at all possible.

1. It is all public record. 

Almost everything that goes through the courts, including probate, becomes a matter of public record. This means that in order to properly wind up your affairs (i.e., pay your bills, file any remaining tax returns, and distribute your money and property to your chosen recipients), documents—including associated family and financial information—could become accessible through the probate court to anyone who wants to see them. This does not necessarily mean that account numbers and Social Security numbers will be made public, as the courts have at least taken some steps to reduce the risk of identity theft. But what it does mean is that the value of your accounts and property, creditor claims, the identities of your beneficiaries, contact information for your loved ones, and even any family disagreements that affect the distribution of your money and property may be publicly available. Most people prefer to keep this type of information private, and the best way to ensure discretion is to keep your affairs out of probate.

2. It can be expensive. 

Thanks to court costs, attorney’s fees, executor fees, and other related expenses, the price tag for probate can easily reach into the thousands of dollars, even for small or simple matters. These costs can easily skyrocket into the tens of thousands or more if family disputes or creditor claims arise during the process. Your money and property should be going to your loved ones, but if it goes through probate, a significant portion could go to the courts and legal fees instead.

Of course, setting up an estate plan that avoids probate does have its own costs. Benjamin Franklin wrote, “An ounce of prevention is worth a pound of cure.” Like the “ounce of prevention,” costs you incur now to put a plan in place are more easily controlled than uncertain costs in the future, especially when you consider that your loved ones may be making decisions while grieving. With proper planning, you can minimize the risk of costly conflict and also reduce or eliminate some costs; if there is no probate case, there will not be any probate filing fees or court costs.

3. It can take a long time. 

While the time frame for probating an estate can vary widely by state and by the value, amount, and complexity of the deceased person’s accounts and property, probate is not generally a quick process. It is not unusual for probates, even seemingly simple ones, to take six months to a year or more, during which time your beneficiaries may not have easy access to the money and property you intended to leave them. This delay can be especially difficult for loved ones experiencing hardship who might benefit from a faster, simpler process, such as the living trust administration process. Bypassing probate can significantly expedite the disbursement of money and property so that beneficiaries can benefit from their inheritance sooner. If you have property located in multiple states, a version of the probate process must be repeated in each state in which you hold property. This repetition can cost your loved ones even more time and money. The good news is that with proper trust-centered estate planning, you can avoid probate in all of the states, simplify the transfer of your financial legacy, and provide lifelong tax savings and asset protection to your family. To learn more, call us to schedule an appointment. One of our experienced attorneys will be happy to strategize with you.

In estate planning circles, the word “probate” often carries a negative connotation. Indeed, for many people—especially those with valuable accounts and property—financial planners recommend trying to keep accounts and property out of probate whenever possible. That being said, the probate system was ultimately established to protect the deceased’s accounts and property as well as their family, and in some cases, it may even work to an advantage. Let us look briefly at the pros and cons of going through probate.

The Pros

For some situations, especially those in which the deceased person left no will, the system works to make sure all accounts and property are distributed according to state law. Here are some potential advantages of having the probate court involved in wrapping up a deceased person’s affairs:

• It provides a trustworthy procedure for redistributing the deceased person’s property if the deceased person did not have a will.
• It validates and enforces the intentions of the deceased person if a will exists.
• It ensures that taxes and valid debts are paid so there is finality to the deceased person’s affairs rather than an uncertain, lingering feeling for the beneficiaries. 
• If the deceased person had debt or outstanding bills, probate provides a method for limiting the time in which creditors may file claims, which may result in discharge, reduction, or other beneficial settlement of debts.
• Probate can be advantageous for distributing smaller estates in which estate planning was unaffordable.
• It allows for third-party oversight by a respected authority figure (judge or clerk), potentially limiting conflicts among loved ones and helping to ensure that everyone is on their best behavior. 

The Cons

While probate is intended to work fairly to facilitate the transfer of accounts and property after someone dies, consider bypassing the process for these reasons:

• Probate is generally a matter of public record, which means that some documents, including personal family and financial information, become public knowledge.
• There may be considerable costs, including court fees, attorney’s fees, and executor fees, all of which get deducted from the value of what you were intending to leave behind to your loved ones.
• Probate can be time-consuming, holding up distribution of your beneficiaries’ inheritance for months and sometimes years. 
• Probate can be complicated and stressful for your executor and your beneficiaries. 

Bottom line: While probate is a default mechanism that ultimately works to enforce fair distribution of even small amounts of money and property, it can create undue cost and delays. For that reason, many people prefer to use strategies to keep their property out of probate when they die.

An experienced estate planning attorney can develop a strategy to help you avoid probate and make life easier for the next generation. For more information about your options, contact us today to schedule a consultation.