In this article I am going to discuss how to avoid probate without a revocable living trust. I am going to feel like the wayward magician that reveals how magic tricks are performed because I will discuss how to accomplish a goal without using a service attorneys provide (forming a trust). Nonetheless, I think a revocable trust is the best way to avoid probate and I think people who are informed of alternate methods of accomplishing objectives ultimately can decide for themselves how they want their estate plan to work.
When looking at the title of this article, I imply two things. You want to avoid probate and maybe you want to avoid probate without creating a trust. Before revealing anything, I want to explain why someone may want to avoid probate without using a revocable living trust.
What is probate?
When someone passes away, probate is necessary to determine the rightful owner of a deceased person’s assets. It is a court process that is regulated by complex court rules.
Why do people want to avoid probate?
– Probate can be expensive with costs commonly ranging between $5,000 and $20,000.
– It is a public proceeding where anyone can gain access to personal affairs.
– It can be time consuming ranging from months to over a year from start to finish.
– All of the above can place a burden on your loved ones who would be involved in carrying out the process.
Why do we want to avoid probate without using a trust?
Revocable living trusts are generally best established by attorneys. People may want to avoid attorneys because they are unsure who is most qualified to create a trust. Additionally, people may fear that a qualified attorney may charge excessive fees.
Having laid the groundwork of why people want to avoid probate and why they may want to do it without a trust, we are ready to reveal the magic. Probate is triggered when a person owns more than $50,000 of personal property or $75,000 of real property at the time of their death. A trust is a good tool to avoid probate because assets that are transferred to a trust don’t count towards those thresholds. Additionally, assets which have beneficiary designations don’t count towards those thresholds and that is the magic. When beneficiary designations are properly established, they will transfer the asset automatically on death and thus avoid probate. The following are used to name beneficiaries on different assets:
– Real Estate – create a Beneficiary deed
– Financial Account – set up transfer on death or payable on death
– Automobile – Set up beneficiary with DMV
The idea is to make sure any asset that could push you over the thresholds mentioned above has a beneficiary attached to it. Without a beneficiary in place, probate proceedings may be necessary to determine who is entitled to the asset.
An advantage to using a trust over establishing beneficiary designations on each asset is that when you want to make changes to how your assets are distributed, you only have to amend the trust. Without a trust you have to go to each individual asset and modify the beneficiary designations. When you have several assets and multiple beneficiaries, this can be a nuisance. Another advantage of a trust is that it can distribute assets only on certain conditions (like at a certain age or upon graduation or special achievements). When using beneficiary designations, young or irresponsible beneficiaries would have discretion to use the proceeds however they want. With a trust, assets can be conserved by a trustee (a person who acts as a manager of a trust).
In short, there are ways to avoid probate without the use of a revocable living trust. However, the cost of a trust may cover itself multiple times over when it comes to accomplishing your specific objectives in the most efficient way possible. While there are scenarios where I recommend avoiding probate without the use of a trust, they seem pretty rare. Regardless of your preference, it is important to seek the advice of an Attorney. For a free consultation with one of our estate planning attorneys, call 480-5153716.
Written by Scottsdale Estate Planning Attorney Zachary Dana