by Alyson C. Fudge, Esq.
When we discuss planning for the future, one of the main concerns that most people have involves who gets what after an individual dies and how they get it. Many folks believe that when they do a simple will, people just magically get the things left in the will without any further steps. This could not be further from the truth. The reality is that the job of a will is to go through probate, and probate is the 9-12 month (best case scenario—it could take longer) bureaucratic process of taking assets out of the name of dead person, and putting those same assets into the name or names of the person or people they are supposed to go to next as per the terms of the will. In other words, wills give directions and probate is the process of actually following those directions and putting the plan outlined in the will into action.
Many people are surprised to find out how long the probate process takes, how many forms are involved, and most surprisingly, that the estate has to pay fees to the Probate Court for the privilege of going through the probate process. Consequently, people sometimes ask about how to avoid probate instead, and that leads us to talk about trusts. As I explain to everyone, there are many types of trusts and which type you need (if you need or want one at all) depends in large part on what goals you are trying to accomplish. To demonstrate this concept with an analogy, imagine that you have a choice between a Ferrari and a Jeep. The one you choose is in dependent on what you would like to do with it—ie what goals you are trying to accomplish. For example, if your goal is to go around a race track very quickly, the Ferrari looks like the best option. However, if your goal is to go off-roading, the Ferrari looks pretty useless and the Jeep starts to look like a better choice.
Trusts are the same—there are many different types of trusts and they each excel at accomplishing a different goal. To simply avoid the probate process, the type of trust we most often use is called a Living Revocable Trust. What does that mean exactly? Well, the term “Living” means that you create the trust while you are alive. The term “Revocable” means that you can make changes to the trust as long as you are still alive and have mental capacity. Lastly, people are confused about what a trust is. In short, a trust is something that owns things—houses, property, accounts, etc. Living Revocable Trusts avoid probate simply by the person’s assets being transferred to the trust while the person is still alive. In this case, the person doesn’t technically own anything (although most often the same person is the Trustee—the person in charge of the trust, so no control is given up). Since no assets are in the name of the person, when the person dies, there is nothing to transfer out of his name and therefore there is nothing to probate. It’s the tech-nical issue of ownership that makes the difference between having to go through the entire probate process or not. With a trust, there should always be an alternate Trustee named, so that when the person who created the trust dies (the first Trustee), the alternate trustee can take over and simply distribute the assets according the terms of the trust.
Unlike probate which is a completely public process, trusts are private in addition to allowing for immediate transfer of assets. As probate is a county process, if someone owns property in more than one state or county, putting those properties in a trust can avoid one person’s estate having to go through multiple probates while paying multiple attorneys and multiple courts. There are many other ways in which trusts can benefit individuals and families—second or subsequent marriages with children from prior relationships, protecting assets if an adult child has an alcohol or substance abuse issue, and of course, protecting children or grandchildren with special needs or disabilities. In the end, each person has to decide which avenue is best for him and his family—a simple will or a trust. Please consult a qualified elder law attorney for more personalized information regarding your specific situation.
