What is Probate, and why should I avoid it?
When a person passes away, their estate goes through a court-managed process called Probate or Estate Administration, where the deceased’s assets are managed and distributed. If you or a family member own assets through a properly drafted and funded Living Trust, no court-managed administration is likely necessary. Instead, a successor Trustee administers the distribution of assets. The time needed to complete the Probate process depends on the complexity and size of the estate, and the local Probate Court’s schedules and rules.
Every probate estate involves these basic steps:
- Filing a petition at the local probate court
- Sending a notice to heirs under the Will or to statutory heirs (no Will)
- Filing a petition to appoint an Executor for a Will or an Administrator for the estate
- Taking inventory and appraising estate assets, done by the Executor/Administrator
- Paying estate debt to creditors
- Selling estate assets
- Paying estate taxes, if applicable
- Distributing assets to heirs
What is a Revocable Living Trust?
A Revocable Living Trust (RLT) is an estate planning tool that keeps you in control of your assets throughout your lifetime, has them managed during incapacity, and efficiently and privately transferred to beneficiaries when you die and according to your wishes.
An RLT holds legal title to your assets and lets you manage them. You serve as the Trustee and beneficiary of your Trust while alive. A designated successor Trustee, chosen by you, carries out your instructions for managing and distributing assets in case of death or incapacity.
For the Living Trust to function correctly, you need to transfer your assets to a Living Trust during your lifetime. The word “revocable” means that you can change it or terminate it any time you want.
What are the benefits of a Living Trust?
Similar to a Will, a Living Trust is a legal document that provides for managing and distributing assets after a person passes away. However, a Living Trust has more advantages than a Will. It allows for the immediate transfer of assets after death without court interference. It also allows you to manage your affairs if you become incapacitated without going through a guardianship or conservatorship process. Properly funding a Living Trust avoids a potentially expensive and time-consuming public Probate process. A personalized estate plan using a Living Trust offers your family the ability to administer your estate privately and with more flexibility.
Will I lose any control over my property if I create a Revocable Living Trust?
A Revocable Living Trust transfers your assets to the name of that Trust and generally doesn’t affect your ability to control your assets. While alive and mentally competent, you have complete control. As the Trustee, you can manage any transaction that you can without a Trust. Your income taxes won’t change, and you won’t need to obtain a new Tax Identification Number. Whatever forms you filed before will still apply to a Living Trust. Your Living Trust is revocable and can be modified at any time or revoked entirely. Upon your incapacity, the individuals you designate can transact on your behalf according to the instructions in your Trust. When you pass, the Living Trust can no longer be modified, and the successor Trustee(s) you have designated proceeds to disperse assets to your beneficiaries as directed.
Do I have to transfer all my assets to my Living Trust?
Assets, such as a life insurance policy or annuity, are paid directly to a named beneficiary and don’t need to be transferred to your Living Trust. Also, money from IRAs, Keoghs, 401(k) accounts, and most other retirement accounts transfer automatically, outside Probate, to your beneficiaries. Bank accounts that are set up as a payable-on-death account (POD), or an “in trust for” account (Totten Trust) with a named beneficiary also pass to that beneficiary without having to be titled into your Trust. However, it is crucial to seek the counsel of an experienced estate planning attorney who can advise and assist you with transferring the necessary assets to your Trust.
If I transfer real property titles to a Living Trust, can the bank accelerate my mortgage?
Financial institutions are prohibited by law from calling or accelerating your loan after transferring property to your living trust when you still live in that home—the only exception to the federal law, enacted as part of the 1982 Garn-St. Germain Act is that it does not protect residential real estate with more than five dwelling units.
Contact us to learn more!
The attorneys at the Law Office of Gold and Dezik are dedicated to helping you and your loved ones understand estate and trust planning, elder law, Medicaid planning, and trust settlements. We discuss New York estate laws in and around the Niagara Falls area to help you create an estate plan that meets your family’s needs.
The Law Office of Gold and Dezik assists clients in the Western New York area, including Niagara Falls, Niagara County, Buffalo, and beyond.