Though planning for one’s demise can be overly sensitive and emotional, it’ll greatly benefit your family. One of the plans to put in place is the preparation of trust in place of a will to save family members the stress of facing the lengthy process of probate. A trust can provide numerous benefits for your estate, including protection from creditors, tax savings, and greater control over how assets are distributed after death. Setting up a trust is not complicated; an estate planning attorney in Scottsdale can help you set up a trust to ensure that your assets will be distributed according to your wishes without the need for probate.
Read on to learn more about what a trust is and why it is the best option for avoiding probate.
What is a trust?
A trust is a legal agreement that allows an individual, known as the grantor or settlor, to transfer ownership of their assets to a trustee. The trustee is responsible for managing and distributing the assets in the trust according to the terms outlined in the trust instrument or trust agreement. This document, also known as the trust deed, contains the instructions for how the trust assets are to be handled, including how they are to be managed, invested, and distributed. It also identifies the beneficiaries who will receive the assets and the conditions under which they will receive them.
There are different types of trusts that can be used for various purposes, such as estate planning, asset protection, tax planning, and charitable giving. Some trusts are set up during the grantor’s lifetime and are known as Living Trusts, while others are established upon the grantor’s death, known as Testamentary Trusts. Estate planning trusts, such as Living Trusts, are often used to avoid probate and to ensure that assets are distributed according to the grantor’s wishes. They can also be used to protect assets from creditors, reduce taxes, and provide for a special needs beneficiary.
What is probate?
Probate is the legal process of distributing a deceased person’s assets to their beneficiaries. It is a court-supervised process that involves proving the validity of a will if one exists, and determining the distribution of the deceased person’s assets. The process is typically initiated after someone has died and involves several steps such as:
- Filing a petition with the court to open the probate process
- Appointing a personal representative (executor) to manage the deceased person’s assets
- Notifying the beneficiaries and creditors of the deceased person
- Identifying, collecting, and valuing the deceased person’s assets
- Paying any debts and taxes owed by the deceased person’s estate
- Distributing the remaining assets to the beneficiaries according to the terms of the will or state law if there is no will
The probate process can take several months to several years, and it can be costly and time-consuming.
How Does A Trust Help You Avoid Probate?
A trust can be an effective tool for avoiding probate because it allows the grantor to transfer ownership of their assets to a trustee, who will then manage and distribute them according to the terms of the trust. Because the grantor no longer owns the assets, they are not subject to probate.
When a person dies, and their assets are held in a trust, the trustee can distribute the assets to the beneficiaries named in the trust without the need for probate court approval. This can save time and money, and it can also be a more private process as probate proceedings are public court records. The trustee can also distribute the assets in a way that aligns with the grantor’s wishes rather than state laws which can be more restrictive.
Additionally, trusts can have a “pour-over” will provision. A “pour-over” will is a type of will that is used in conjunction with a living trust. It is designed to ensure that any assets that were not transferred to the trust during the grantor’s lifetime are transferred to the trust upon their death. The purpose of a pour-over will is to ensure that all of the grantor’s assets are included in the trust and avoid probate. Basically, the pour-over provision allows the grantor to retain control of their assets during their lifetime while ensuring that they are transferred to the trust after death.
Overall, trust is a powerful and flexible tool that can be used to achieve a variety of goals and protect assets for future generations. An experienced estate planning attorney can assist in creating a trust that is tailored to your specific needs and goals.