Unfortunately, when people think about estate planning, they often think first or only of a Will. Even in mainstream media, they most often talk about a Will, that so and so is being “cut out of the Will”, or some well-known celebrity's Will is being contested or fought over by a spouse or distant family member.
Sadly, a Will is merely a ticket to Probate Court, eventually forcing you and your loved ones into a cumbersome, time-consuming, and costly process. It's true there are other “probate avoidance” planning techniques such as certain powers of attorney, ways of holding title to assets (like joint tenancy with another person), or naming beneficiaries of accounts (like bank deposits or IRAs). But these surface-level Probate avoidance techniques often distribute assets to the wrong people (or at the wrong time), don't provide needed management (for you if you're disabled or your loved ones after you're gone), and don't properly protect loved ones' inheritances from third-party predators (spouses, lawsuits, creditors, certain taxes or loss of government benefits).
What is a Probate Avoidance Trust?
A Probate Avoidance Trust (PAT) is a basic version of a trust. A trust, in this simplest form, is a legal structure that an individual can create to hold ownership of stuff. Essentially, instead of you owning your house, your antiques, your retirement accounts, etc., all this stuff is owned by a distinct entity called a trust.
If you decide to create a PAT, you work with an attorney to create a trust agreement, which is basically a contract between three parties: the trust-maker, the trustee (who is responsible for overseeing the trust), and the beneficiary (who will be the ultimate recipient of the funds in the trust). Basically, everything stays the same. You still own your stuff and are free to use it in any way you want. Then, when you die (or become incapacitated), the trustee responsibilities pass to a person you name as successor trustee, and the beneficiaries become the people you named to receive your stuff. You can even place restrictions in the trust instructions on when, in what amounts, and for what purposes these funds are distributed.
A Living Trust is Preferred Over a Will
A Living Trust is the most ideal estate planning vehicle for most people, particularly those who want to avoid Probate, as well as assure control of the distribution, management, and preservation of their lifetime's hard-earned assets.
Keep in mind that there are two forms of Probate, where you and your assets can be tied up in a Court. One can occur when you're living but ill or disabled, known as a “Conservatorship”. And another can happen when you're gone, known as a “Death Probate”. The purpose of a Living Trust is to avoid both.
Signing Your Living Trust is NOT Enough
Did you know that even having a Living Trust does not guarantee you Probate avoidance?
Many Living Trust preparers don't realize this either, particularly if they haven't handled many Trusts after clients have become disabled or died. The reason why this happens is that even though you may have signed your Living Trust, there is another step that must be accomplished properly in order for your assets to avoid a costly and disastrous Probate. This is something called funding or transferring your assets into your Living Trust.
The titles (or in some cases, beneficiaries) to each of your assets must be properly placed into the name of your Living Trust. Assets left outside of your Living Trust may go through Probate. In California, if the total value of assets outside your Living Trust exceeds $166,250, you may have a Probate. And even if your estate value is less but you have just one piece of real estate with a gross value over $50,000 that's not in your Living Trust (basically anything other than a piece of dirt in the desert!), you may still have a Probate.
In fact, this is exactly what happened to pop legend, Michael Jackson's estate when he died in 2009. It was a prime example of doing the right thing setting up a Living Trust, but then not finishing it. The result was that it has been many years of very public and contentious battles over his $500 million estate.
Some people think that merely attaching a list of your assets to your Living Trust is sufficient to transfer them into it. The unfortunate truth is this just doesn't work without going to Court.
Other people think that the Will they get with their Living Trust - - commonly referred to as a “Pourover Will” - - avoids Probate of those assets left out of the Living Trust when you die. It's true that this Pourover Will catches those assets left outside the Trust and makes sure that they are placed into the Trust and distributed according to its terms. However, remember assets passing through a Will must typically go through Probate Court first!
If you set up a Living Trust and don't get your assets into it, you've only gotten half (or less) of the job done. At our firm, we assist our clients with placing their assets into their Living Trust - - so their families will avoid Probate.
The “Missing Links”
At the same time as you sign your Trust, we prepare legal documents (deeds) to transfer in your real estate. We also assist you in the transfer of your non-real estate assets. But we don't stop there, one other key thing we do for you is we provide a free attorney check-up meeting every three years.
Here's why this 3-year free check-up meeting is so important - - and it has nothing to do with changes in your wishes, the laws, or in planning techniques that often occur over time. By checking in with you every 3 years, we also check that all of your assets are properly in your Living Trust so you'll know you will avoid Probate.
If we catch something improperly held outside of your Living Trust, we will help you get it in right then and there. That's why we can proudly say that very few of our clients have ever gone through the burdens of Probate - - and “coincidentally” those were mostly clients who failed to come in for their 3-year review meeting!
What Steps Should You Take Right Now
Here are a few things that you can do to help assure that you and your friends, family, and loved ones can avoid the stress and expense of Probate Court:
- If you have a Living Trust, be sure that it is up-to-date and reviewed by an attorney to ensure that your Trust is properly funded and you will avoid Probate. If you're an existing client of our law firm, simply call us at (661) 426-2499 and schedule your free review meeting with an attorney. If you're not a client, that's okay! We update trusts from other attorneys all the time. If you're not a client, we urge you to attend one of our upcoming seminars to prepare you for a free 90-minute consultation with one of our attorneys and take advantage of a limited-time fee discount on an update to your Trust.
- If you only have a Will, it might be time to consider the benefits of upgrading your estate plan to a Living Trust. Even if you don't have a very large estate and may not be exposed to much of a Probate after you pass away, the benefits of a Living Trust while you're living - - appointing the right people to take care of you and your affairs properly if you're ill or disabled, without going through a Conservatorship - - is well worth the cost to get it set up. If you own any real estate in California, regardless of equity, we highly recommend you consider upgrading to a Living Trust to avoid Probate.
- If you don't have anything in place, no worries. This is where we can help you like we have helped thousands of your neighbors over the years. Attend one of our upcoming seminars and at the conclusion of the seminar you will have the opportunity to schedule a free consultation with one of our attorneys and you will also qualify for a discount to set up your Living Trust. Now is always the best time to get your estate plan in order.
Contact Our Lancaster Estate Planning Team Today
If you are already set, that's great. However, many people don't know or understand the benefits of proper estate planning. So, if you know of anyone who may benefit, whether they have a Will or a Trust or not—a family member, friend, coworker, neighbor, church member, etc.—please pass this information along to them so that can properly plan to avoid Probate Court too!
If you would like probate matters or have questions about where to start, do not hesitate to contact us today through our website or give us a call at (661) 426-2499 to schedule a consultation!