Does a Living Trust REALLY Avoid Probate?
When Living Trusts Require Probate
Wills versus Living Trusts
Hey there I’m Estate Planning attorney Paul Rabalais and in this post I’m going to discuss the circumstances surrounding when someone, or a couple, creates a living trust to avoid the attorney and court-involved probate process at death, but then when they pass away, a probate is still required. So quite a bit is written and said about the decision people make in their estate planning regarding whether to have a will-based plan or a revocable living trust based estate plan. The will plan requires that you have a will which dictates who inherits from you, you leave all your assets in your name, and when you pass away, because assets are in your name, they become frozen and a court and lawyer-involved probate proceeding is required so that judges can order third parties to transfer assets to your heirs. With a living trust based estate plan, the concept is create your living trust instrument which dictates who inherits from you, then transfer your assets from your name to your trust, and then when you pass away, those assets can be transferred out of your trust to your beneficiaries without the expense and delays of probate.
When Probate is Necessary
And while everyone who wants to make their estate settlement easy for their survivors likes the potential “avoid the hassles of probate” outcome that a living trust plan can offer, in reality, sometimes a probate is still necessary when someone creates a living trust with the intent to avoid probate.
Comment Below
My intent in this post is to get you viewers who have had an experience when a spouse or parent or grandparent passed away with a living trust. I’d like for you to comment below and let me and the viewers know whether that living trust enabled the family to completely avoid probate, or whether there was some issue involved in the estate settlement, such as an account or piece of property that was still in the name of the deceased person when they died, that required a probate to take place, even though the person who passed away created a living trust.
Reasons Requiring Probate
So the top reasons estates of people who created a living trust must go through probate include: not re-titling an asset of yours into your trust when you create your trust, opening an account or acquiring a piece of property after you create your trust but you do not open the account or acquire the property in the name of your trust; or having a check, such as a tax refund check or a refund check from a retirement facility, payable to your estate after you pass away.
Probate Can Be Simpler
Now, when someone with a living trust passes away and a probate is still required, the probate is often easier to complete than if they had no trust for two reasons: first, only those non-trust assets need to go through probate so the trust assets can be disbursed immediately upon the death of the trust creator; and second, the probate is simpler because typically, only one person is involved in the probate because the pour-over will created when the trust was made likely names the same person as the executor of the will and the successor trustee of the living trust. So that person is the only participant involved in the probate because the will directs that any assets in the name of the deceased person are to be transferred to the trust upon the death of the person who made the trust. What often makes probates a nightmare is when several people are involved in the probate and there is one or more participants who, for one reason or another, are problematic.
Need Your Comments
So I’ll be looking for some comments below from you trust beneficiaries, or even you attorneys or financial advisors, who have either been through or counseled people who have been through an estate settlement when a living trust was involved. I’m looking for you to answer the following questions: Did the living trust enable the survivors to completely avoid probate? Was there a reason that a probate was required even though a living trust existed? And if so, did the living trust simplify portions of the estate settlement process? Was there disappointment among survivors because they felt the existence of the living trust alone was sufficient to avoid probate? Again, asking you to do me a favor and share any experiences that you have been through regarding this topic.
My Situation
As I look at my personal situation, I know that if something were to happen to me today, a probate will be required even though my wife and I have our living trust. While none of our investment accounts will be frozen since all our nonqualified investment accounts are titled in the name of our trust, I do have one piece of real estate that has not yet been re-titled to our trust (I need to do that by the way because perhaps I’m guilty of “The Shoemaker’s Children Syndrome” where the shoemaker was so busy making shoes for his customers that his children went shoeless).
Anyway, I’d love for you to share your experiences in the comments below regarding this topic of how often the estate of someone with a living trust must go through probate for some reason. I think your participation in the comments section will allow more Americans to make informed decisions about arranging their estate for their loved ones. Have a great day.