Many Turn to Living Trusts to Avoid Probate

Many people have good reason to revisit their estate plans because of changes to tax laws that were passed by Congress at the end of 2010. Some of those people will go to great lengths to avoid probate, even though most of their wealth will not pass through probate anyway.

Probate is where a court determines a will's validity. The process is not necessarily a long or costly one, but it is a public one. Some people would prefer to keep their wealth and its distribution private. Other factors, such as the terms of a prenuptial agreement, can also become public through probate.

The tool most people think of when trying to avoid probate is the living trust. The assets that fund a living trust can benefit you while you are living, and go to whoever you choose when you die.

The thing is, it is very difficult to get absolutely everything you own into a living trust. There is almost always some other property. Most Florida living trust attorneys would recommend having a will to cover any property not in a trust.

Another thing to consider is that some property will not go through probate regardless of the terms of a living trust or of a will. This category includes retirement assets, life insurance and savings bonds, and jointly held real estate, bank accounts, and brokerage accounts.

If, for example, a parent opens a joint bank account with a child, that child automatically gets the money in that account when the parent dies. The child has no obligation to share the money with other siblings. This situation should be kept in mind so that the desired outcomes match the actual outcomes.

The discussion of probate and living trusts will continue in the next post.

Source: New York Times "Efforts to Avoid Probate Can Carry Their Own Risks" 2/9/2011