BE SURE TO FUND YOUR TRUST!
Probate
Probate may be defined as the judicial process of administering your estate. Depending on the State, probate occurs when you pass away with or without a will. This is often an expensive and time consuming endeavor that can take several months. Naturally, people try to avoid this process by establishing a trust. While a trust may be more expensive than just doing a will for estate planning purposes, the challenges that arise in a probate will likely be more costly both emotionally and financially.
For example, when there’s a probate, it is a public administration of your estate. In addition, the personal representative of your estate (the person appointed who administers the estate) must notify all the interested parties of the estate. This, along with the administration of the estate being public, is an invitation for those involved to litigate. Probate litigation poisons family relationships and dwindles the estate, in some cases, to nothing. The only people who win in probate litigation are the attorneys who are being paid from the estate. So establishing a revocable living trust is a better option in almost every case.
However, a common misconception among clients is that once a trust is established, probate is automatically avoided. See Robert Feldman, Misconceptions About Estate Planning, Ariz. Att’y, 1999, August/September at 30-31. After all, this is a major selling point of establishing a trust. However, establishing a trust is only the first step.
How to Avoid Probate
To successfully avoid probate, the creator of the trust, the “Grantor,” must fund the trust during their lifetime. See id. at 30, 31. This is essential because “[a] trust without property is not a trust at all.” See Morris, Kinghorn, K. F., & Nielsen, W. D., Arizona Practice Series: Estate Planning and Probate Handbook § 10:57 (2007). There’s no sense in setting up a trust if you’re not going to use it.
How to Fund Your Trust
So, what can the trust be funded with? In Arizona, there are a lot of things that can fund a Trust. While not everything necessarily needs to go in a Trust, some basic assets include: Your real estate (residence), rental properties (owned by LLCs which are owned by the Trust), bank accounts, 401k, IRA, (these last two would not be owned by the trust but would be named as contingent beneficiaries after the surviving spouse). Put simply, there are almost no limits as to what a trustor can put into a trust. See id. Typically, the more assets funded to the trust, the more protection there is from a probate.
When you’re our client Here at Durfee Law Group, we guide you to properly fund your trust(s), and we do what we can to help ensure that your loved ones do not have to go through probate. In the unfortunate event that you do find yourself in the middle of a probate, we can help.
Daylin Hopson contributed to this article.