Estate & Business Law
Probate is the legal process through which the court sees that, after you pass away, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to state law.
If you have a living trust, you will also need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your living trust. When you pass away, the pour-over will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your overall living trust plan. A guardian for minor children must also named in a will.
If you have a living trust, and you and your spouse are co-trustees, either can act and have instant control if one of you becomes incapacitated or passes away. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you resume control. When you die, your successor trustee pays your debts, files your tax returns and distributes your assets. All can be done quickly and privately, according to instructions in your trust, without court interference.
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should also name some additional successors in case your first choice is unable to act.
A living trust is a legal document that, like a will, contains your instructions for what you want to happen to your assets when you pass away. However, unlike a will, a living trust can avoid probate at death, control all of your assets, and prevent the court from controlling your assets if you become incapacitated.
When you set up a living trust, you transfer assets from your name to the name of your trust, which you continue to control. For example, you would transfer the property from “Bob and Sue Smith, husband and wife” to “Bob and Sue Smith, trustees of the Smith Family Trust, dated (month/day/year).”
Legally you no longer own anything; everything now belongs to your trust. There is nothing for the courts to control when you pass away or become incapacitated. However, you keep full control of the assets you place in the trust. As trustee of your trust, you can do anything you could do before—buy and sell assets, change or even cancel your trust. That is why it’s called a revocable living trust. You even file the same tax returns. Nothing changes but the names on the titles.
The concept is simple, but this is what keeps you and your family out of the courts.
Contrary to what you’ve probably heard, a will may not be the best plan for you and your family. That’s primarily because a will does not avoid probate when you pass away. A will must be validated by the probate court before it can be enforced.
Also, because a will can only go into effect after you pass away, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die—a concern for millions of older Americans and their families.
Fortunately, there is a simple and proven alternative to a will–a revocable living trust. It avoids probate and lets you keep control of your assets while you are living—even if you become incapacitated—and after you pass away.