Living Trust & Probate

A living trust is a legal document that helps avoid and minimize probate.

A living trust is a legal tool to streamline and, in some instances, altogether avoid the probate process. Probate involves the court supervision of the distribution of a person's property and estate after that person dies. Because probate can be a burdensome and involved process, many estate planning experts recommend creating a living trust in order to minimize the probate process.

Generally

A living trust is not something you can see or touch. It is a creation of legal fiction that, in most instances, is embodied in a written trust agreement or trust declaration. Under state law, a living trust exists when one person transfer property to another person, called a trustee, to be held for benefit of a third person, called the beneficiary. The trustee holds title to the property in the living trust, but the trustee's title is always restricted by the the terms of the living trust.

Time Frame

A living trust is one that a person creates while she is still alive. Contrast a living trust with a testamentary trust that does not exist until a person dies. To take full advantage of the probate-avoidance benefit of a trust, you must create a living trust before you die. A testamentary trust will not help your property avoid probate.

Trust Property

A living trust does not legally exist until the trustee actually receives the trust property. Under state law, any property held by a trustee is no longer considered the property of the previous owner. This is true even if the trustee is the same person as the previous property owner. It is common, for example, to create a living trust where you name yourself as the trustee and where you are the sole contributor of property to the trust. However, as long as you follow the formal legal procedures to properly create the living trust, then the law upholds the trust relationship.

Trust Distribution

When you create your trust by writing out the trust agreement or trust declaration, you will want to include terms for the distribution of income and property from the trust. The trustee will follow your written instructions. Importantly, the living trust operates even after you die. If you are the trustee while you are alive, then the trust should identify a successor trustee to take over after you die. Property that you transfer to the trust while you are alive remains in the trust after you die and will only be distributed out of the trust according to the trust instructions you created.

Wills

A will is a legal document that provides instructions for the probate process. Any property not transferred to your living trust will pass through probate according to the instructions in your will. Many wills provide that all probate property should pass to your living trust and then managed and disbursed according to the terms of the trust. In that sense, the living trust can help avoid probate and can also simplify probate.

References

• "Estate Planning Basics;" Denis Clifford; 2009