Many people form a false impression about the way that an estate is administered when a last will was executed by the decedent. They think that the will is read to family members by the executor, and after everyone knows what it contains, the executor distributes the resources.
In reality, this is not the way that it works. The will would be admitted to probate, and the executor would handle the estate administration tasks under the supervision of the court.
Probate gives creditors the opportunity to come forward seeking satisfaction from the estate before it is distributed to the heirs. There is also a proving of the will, which means that the judge will examine the will to make sure that it is valid. If someone wants to challenge the terms of the will, they can step forward during probate.
This process serves a purpose as you can see, because payment of the debts is only fair, but it is problematic for the rightful inheritors. It will take about nine months to a year for probate to run its course under ordinary circumstances, and more complex cases can take considerably longer.
There is also the matter of money lost. The executor is entitled to payment, and a probate lawyer is often engaged. There can be accounting fees along with appraisal and liquidation charges. When you top it off with the incidental expenses that will be incurred by the executor, you are looking at a significant portion of the estate.
Another pitfall is the loss of privacy. Anyone that has an interest can access probate records, because it is a public proceeding. This knowledge can cause hard feelings among people that were close to the decedent during a time when family members and friends should be supportive of one another.
Probate Avoidance Strategy
It is possible to take steps to avoid the costly and time-consuming process of probate. The most commonly used device that people use as an alternative is the revocable living trust.
As the name would indicate, you have the power of revocation, so you can dissolve the trust if you ever change your mind. While you are alive, you can serve as the trustee and the beneficiary, so you maintain control on that level as well.
In the trust declaration, you name a successor trustee to assume the role after your passing, and your heirs would be the beneficiaries. You can give the successor the ability to manage the trust in the event of your incapacity, or you could name a different disability trustee.
After your passing, the trustee would follow the instructions that you recorded in the trust agreement. The assets would be distributed in accordance with your wishes, and the probate court would not be involved.
Probate avoidance is just one of the benefits to be gained through the utilization of a revocable living trust. If you have a poor money manager on your inheritance list, you can include a spendthrift provision. This would protect the principal from the beneficiary’s creditors.
You would also have the ability to instruct the trustee to provide limited distributions over an extended period of time. For example, the trustee could calculate the annual earnings from appreciable assets and distribute them incrementally on a monthly basis.
Another advantage is the consolidation of the assets that comprise the estate. The trust would own the assets, and this would streamline the administration process.
Attend a Free Seminar!
Our attorneys are holding a series of estate planning seminars over the coming weeks, and you can obtain a lot of very useful information if you attend one of these sessions. There is no charge at all, we do ask that you register in advance so that we know how many people to expect.
To see the dates, visit our seminar page and follow the simple instructions to register for the session that fits into your schedule.
- Estate Planning Made Simple - March 16, 2022
- Plan Now for the Incredible Shrinking Exclusion - June 20, 2021
- An Explanation of the Life Estate - June 19, 2021