Many people view probate as a long laborious and unnecessary process. Because of the reputation of the probate process individuals employ different techniques to create an estate without probatable assets. The main estate planning tool used to avoid probate is creating a Revocable Living Trust. When you create a revocable living trust you have created a vehicle to transfer assets at your death without probate.
The #1 Pitfall? Not Properly using the Revocable Living Trust. A revocable living trust is distinguishable from an irrevocable trust in two major ways: it does not have a separate EIN, and it can be revoked and changed. However, both trusts need to be funded in order for the asset to be a part of the trust and not the probate estate.
What this means is you must evidence a change in ownership from you as an individual to the trust. For instance, if you have an investment account holding stocks in your name when you pass, absent any other information it needs to be probated in order to pass ownership to your heirs. If however, you change the ownership of the account to your Revocable Living Trust, at your passing the account is still owned by the living trust and does not need to go through probate. The determination of the beneficiary of the account is now determined by the trust document and not your will.
The way to fix this problem is to actively utilize your plan and how assets are titled. There are numerous other will substitutes, such as joint tenants with right of survivorship accounts or payable on death accounts. An asset owned as joint tenants with right of survivorship is owned by two individuals equally and will automatically pass the survivor at the passing of one owner. The most common property to pass this way is real property purchased and owned by spouses. Payable on death accounts are owned by one individual but will pay to another person when the account owner dies thus avoiding probate.
The key to an estate plan is understanding your plan and working it correctly. Too frequently individuals will forget about an asset or two and then a small probate matter needs to be opened for a single asset or two. This forces your heirs to deal with the costs and time of probate for a small outcome.
Revolution Law Group is located in Greensboro, NC serving individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit www.revolution.law or call 336-333-7907.
The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.