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Estate Planning: Wills, Probate, and Living Trusts
Families’ two most popular estate planning strategies are Wills and Living Trusts. But contrary to what you would’ve probably heard, a Will may not be the best solution for you and your family. That’s primarily because a Will goes through probate when you die.
What is Probate?
Probate is the legal (and public) court process that validates and administers a deceased person’s Will. After authenticating a deceased person’s Will, a probate court will ensure debts are settled before releasing assets to beneficiaries per the terms of the Will. Probate is a public and often time-consuming and expensive process.
Dying without a Will or a Trust is called dying intestate. When dying intestate, the probate court will require your assets to be distributed according to your state’s law. Laws vary in different states.
Why Families Should Avoid Probate
Probate can often be expensive. Legal fees, executor fees, and other costs must be paid before your assets can be fully distributed to your heirs. In addition, if you own property in other states, your family could face multiple probates, each one according to the laws in that state.
A 1 Million dollar estate in California will cost $46,000 in probate fees (estate worth includes the fair market value of your home).
As a court process, probate is time-consuming. In California, probate usually takes around two years, but often longer. During this time, the court usually freezes your assets while accurately inventorying your estate. Thus, nothing can be distributed or sold without the court’s and/or Will’s executor’s approval. Also, if your family needs money for living expenses, they must request a living allowance, which the court may deny.
With probate, your family has no privacy. Probate is a public process, so any “interested party” can see what you own, your debts, who will receive your assets, and when they will receive them. This means the probate process “invites” disgruntled heirs to contest your Will and can expose your family to unscrupulous solicitors.
Lack of Control
Your family has no control. The court process determines how much it will cost, how long it will take, and what information is made public.
Why Choose A Living Trust?
Avoid Probate: Since the successor trustee distributes the assets according to the trust creator’s instructions, without the interference of the court, living trusts help you avoid probate.
Ensure Your Family’s Privacy: A probate can become a matter of public record. But a living trust is a private document.
Secure Your Assets & Loved Ones: A living trust sets out a clear plan for the distribution of your assets, which can help you protect your assets from certain people and provide care for a loved one with special needs.
Prevent Court from Controlling Your Assets in the Event of Incapacitation: When you have a living trust, the person you chose as the trustee can manage your assets—without the court’s interference— if you become incapacitated or ill.
What is a Living Trust?
A living trust is a legal document that, similar to a Will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a living trust can avoid probate at death, control all of your assets with the use of a trustee similar to a business, and prevent the court from controlling your assets if you become incapacitated.
A good estate plan will include a living trust, pour-over will, durable power of attorney, and an advanced health care directive.