NAELA
ASNP
Five Star Professional
AVVO

How Living Trusts Avoid Probate

Here are the basics on avoiding probate with living trusts.

Most people want to leave as much of their money to their children, or other heirs, as possible -- and want to avoid a big chunk of that money going to probate lawyers. That's where living trusts come in -- they can help in avoiding probate and probate fees.

Probate involves inventorying and appraising the property, paying debts and taxes, and distributing the remainder of the property according to the will. When you make a living trust, your surviving family members can transfer your property quickly and easily, without probate. More of the property you leave goes to the people you want to inherit it.

A basic living trust allows property to avoid probate and to quickly and efficiently pass to the beneficiaries you name, without the hassles and expense of probate court proceedings. A married couple can use one basic living trust to handle both co-owned property and separate property.

Creating a Trust

To create a basic living trust, you make a document called a declaration of trust, which is similar to a will. You name yourself as trustee -- the person in charge of the trust property. If you and your spouse create a trust together, you will be co-trustees.

Then you transfer ownership of some or all of your property to yourself in your capacity as trustee. For example, you might sign a deed transferring your house from yourself to yourself "as trustee of the Jane Smith Revocable Living Trust dated July 12, 2014." Because you're the trustee, you don't give up any control over the property you put in trust.

In the declaration of trust document, you name the people or organizations you want to inherit trust property after your death. You can change those choices if you wish; you can also revoke the trust at any time.

When you make a living trust, you should also make a back-up will. Doing so will ensure that any property not transferred to the trust will go to the people or organizations you want to receive it. If you don't make a will, any property not included in your trust will be distributed according to the laws of your state -- usually to the nearest relatives.

Taxes and Recordkeeping

After a revocable living trust is created, little day-to-day record keeping is required. Just be sure to do the required paperwork whenever you transfer property to or from the trust. That shouldn't be difficult.

EXAMPLE: Monica and David Fielding put their house in a living trust to avoid probate, but later decide to sell it. In the real estate contract and deed transferring ownership to the new owners, Monica and David sign their names "as trustees of the Monica and David Fielding Revocable Living Trust."

No separate income tax records or returns are necessary as long as you are both the grant or and the trustee. (IRS Reg. § 1.671-4.) Income from property in the living trust must be reported on your personal income tax return; you don't have to file a separate tax return for the trust.

After You Die

When you die, the person you named in the trust document to take over -- called the successor trustee-- transfers ownership of trust property to the people you want to get it. In most cases, the successor trustee can handle the whole thing in a few weeks with some simple paperwork. No probate court proceedings are required.

Do You Need a Lawyer to Create a Trust?

Making a living trust takes about the same amount of time and is only a little more complicated than making a will. If your circumstances aren't complicated and you are willing to invest a few hours of your time using an estate planning book or software, you can create a valid, effective trust document.

Client Reviews
★★★★★
"We just received the refund from the facility today. Thank You so very much for all your help with my Mom's file. You and the staff at Wilson & Wilson Estate Planning & Elder Law LLC are outstanding people. It is an Honor to have your law office represent us. I would like to keep in touch with you for future family business." Lou Spataro
★★★★★
"I have known Bill Wilson for years and referred the services of Wilson & Wilson Estate Planning & Elder Law LLC Law Offices to many of my clients. I know they will be met with compassion as well as excellent counsel which is important to families in stressful situations. Dealing with the families in crisis requires skills all of the staff at Wilson & Wilson Estate Planning & Elder Law LLC demonstrate every day." Andrea Donovon
★★★★★
"Bill and his team are outstanding! They are thoughtful, caring and able to handle virtually any estate-related matter. They can take complicated matters and make them simple to understand. And on simple matters, they get it done quickly and for a reasonable fee. I highly recommend the Wilson & Wilson Estate Planning & Elder Law LLC team." G.Grant Dixon III
★★★★★
"Dear Ms. Rabuck, Please accept my sincere appreciation of your involvement and efforts in this case. You have been most understanding, competent and patient as we pursued this matter over the last several months." Robert N. Milano
★★★★★
Gentlemen: "Your office has served me well. Ms. Anne J. Rabuck did an outstanding job of bringing my mixed estate to an orderly conclusion. She is to be complimented. Your staff treated me with respect and cordiality. It was my pleasure to deal with your office. I would recommend you to anyone." Bryon D. Murgatroyd