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Author: Brenton McWilliams

How to Avoid Probate with Estate Planning

One of the major benefits to using a trust for estate planning is the ability to avoid the need for an estate in probate court. If the trust is created and funded properly, there is a continuity of authority over the trust property that lasts beyond the lifetime of the person creating the trust. In other words, the trust creator (also known as the settlor of the trust) is able to designate another person, a successor trustee to the trust creator, who will have the ability and authority to control the property of the trust according to the instructions of the creator of the trust. The roles, authority and duties of the successor trustee can vary, but on a simple level, the successor trustee functions much like an executor of an estate. However, in contrast to the executor of an estate, the successor trustee is appointed by the trust agreement itself and does not require appointment by the probate court or the probate of a last will and testament as part of a probate estate proceeding.

The trust is an entity separate from the person similar to an LLC, corporation or other business entity. However, the typical revocable trust for estate planning is designed with the trust creator as the initial trustee and setup, so that, during the lifetime of the person creating the trust, there is functionally no difference in the way they use the property of the trust, their ownership rights to the property of the trust, the taxation in connection with the property of the trust or their ability to sell the property of the trust. The initial trustee has control over the property and, with a revocable trust, the right to amend or terminate the trust. The trust creator designates another person as the successor trustee to take over management of the trust after the death of the trust creator. At the death of the settlor or at the happening of some sooner event designated in the trust agreement, the successor trustee takes over the trust and immediately has full authority to hold or distribute the trust property according to the terms of the trust without the need for probating a will or petitioning the probate court for authority over property of the deceased.

Why avoid probate? What are benefits of probate avoidance using a trust?

Probate avoidance may be an estate planning goal for several reasons including convenience for the heirs or fiduciary, preventing litigation between the heirs and removing the costs of an estate administration in probate court. By avoiding probate, a trust provides a more efficient and convenient means to transfer property to the heirs. In the typical revocable living trust setup, on the death of the trust creator, the successor trustee can immediately assume the role of trustee, access the property of the trust, sell property to pay off debts or a mortgage, etc. In contrast, the executor named in a last will and testament derives their authority by virtue of an appointment from the probate court. Therefore, the executor cannot access the assets of the estate until the last will and testament is admitted to probate and the executor is appointed by the court – a process that can be prolonged by irresponsible or uncooperative heirs, or delays in receiving the death certificate. If allowing the fiduciary or heirs speedy access to control of the inherited property is a priority, which it often is, the probate avoidance aspect of trust planning may be an appealing benefit to meet that estate planning objective.

Avoiding probate can also relieve the fiduciary or heirs of the need to travel to the local probate court for hearings. It is becoming increasingly common for families to be spread out across the country, especially in Baldwin County where a large portion of our residents are retirees who relocated from areas outside of Alabama. Although many times a testate estate does not require a court appearance, a hearing in probate court may be required if the heirs do not cooperate, if the last will and testament does not include certain important items, or if there is a will contest. Probate avoidance bypasses the probate court in the transfer of the estate and removes the need for the fiduciary or heirs to have any interaction with the local probate court including appearance for a hearing.

Probate avoidance can help prevent friction or litigation among surviving family members or other beneficiaries. In probate court, disinherited family members or fighting beneficiaries can hijack the estate plan by contesting the will early on in the probate process or hampering the progression of the estate by opposing the executor’s actions. Since the will is probated through a court proceeding, the opportunity for litigation is built into the process. In several parts of the estate administration process in probate court, just by refusing to sign a consent, family members or beneficiaries can trigger probate court hearings which drag the timeline of the process out and drive up the costs. By avoiding probate, the revocable living trust removes the typical opportunities to disrupt the estate plan in probate court. Since there is no will to be probated, there is no opportunity for a will contest. There is still an opportunity to dispute the terms of the trust or the settlor’s competency at the time of creation of the trust. However, since the trust is not subject to oversight by the probate court, the procedure to dispute the administration or creation of the trust is not built into the process of trust administration.

Finally, setting up a properly funded trust to avoid probate will save the heirs the costs of an estate administration in probate court.  If the trust is setup and funded properly, the trust will remove the need to open an estate in probate court to transfer property, and, therefore, will also remove the costs of opening an estate in probate court. Probating a will in probate court requires court costs, publication fees and attorney’s fees, assuming an attorney is hired to assist with the probate process. With the typical revocable living trust setup, the successor trustee has authority over the assets of the trust automatically on the death of the trust creator without the need for opening an estate in probate court. Therefore, removing estate administration in probate court avoids all of the additional costs above which are typically borne by the heirs of the estate.

If you need help with estate planning, please call me at (251) 215-9275 or write me on the contact page to discuss how I can help.