Probate, Estate and Trust Administration
Probate and estate administration are the processes by which assets held in an estate are transferred after death. If proper probate avoidance planning has not been implemented prior to death, the state will require that a probate court proceeding be initiated if the deceased was a resident or owned assets in the state. Depending on the state and value of assets passing through probate, the level of court involvement and supervision can vary greatly.
Because probate can (depending on the state) be a costly, time-consuming and public process, many people choose to avoid it by using a legal strategy that will allow you to pass property to another person after death, without going through probate.
- Joint Tenancy & Tenancy by the Entirety. Making another person a joint owner or "joint tenant with rights of survivorship" on your assets will allow your property to pass to them upon your death without going through probate. There are pitfalls to this strategy, however, to include subjecting such assets to any claims (such as lawsuits) against the co-owner and making them available to the co-owner's creditors -- all while you are still alive and planning on using the assets yourself. It is important to note that certain gift tax consequences may arise in the creation of joint tenancies if care is not taken.
- Beneficiary Designations. Arizona, Florida and Texas each allow Transfer on Death (TOD), Pay on Death (POD) or In Trust For (ITF) type beneficiary designations to be added to bank accounts. Beneficiary designations like these are preferable to joint tenancy in that they allow you to transfer property only upon your death without giving away current ownership. One of the drawbacks, however, is that it can be difficult to obtain an equitable distribution of property among your heirs by utilizing beneficiary designations. It is important to understand that if you have beneficiaries listed on your assets, then those assets will be distributed upon your death to such beneficiaries, even if your last will provides for a different beneficiary to receive those assets.
- Revocable Living Trust. A Revocable Living Trust is a legal document that enables you to establish a legal relationship with a separate entity (the trust) or individual (the trustee) as the legal owner of your assets while you are alive, and to name trustees to manage those assets (including transferring the assets back to yourself or otherwise disposing of such assets) according to the trust terms that you have established. Normally, you serve as the initial trustee while you are alive and manage your assets for your own benefit. Upon your disability or death, the trust terms appoint your successor trustee who then continues to manage -- or distribute -- the assets held in trust. A properly drafted trust can accomplish many goals, including guardianship and probate avoidance for your estate and bloodline, marital and creditor protection for your children.
Estate and Trust Administration
If a trust has been properly drafted and funded, then the assets held by that trust will generally avoid probate. While the trust document is not normally filed with the probate court, there are still certain steps necessary to administer the trust: beneficiaries must be contacted; assets must be gathered, valued and managed; potential creditors must be notified; debts, taxes and final expenses must be paid; and, ultimately, any remaining income and assets must be distributed in compliance with the trust terms. Depending on who the successor trustees are under the trust, they may lack the time, resources or knowledge to personally administer the trust. The trustees should call upon legal, accounting and investment professionals for assistance. In certain circumstances, a corporate fiduciary (e.g., a trust company) may be a good alternative to relying solely on busy family members or friends to serve as trustee. We can help your successor trustee(s) deal with the complexities of administering your estate and trust.