Q: What is Probate and why does everyone want to avoid it?
Although there are certain advantages that may come with probate, a majority of people will find that the disadvantages are greater. Probate refers to a court-supervised process that must take place prior to a Will becoming effect. During this process, an individual’s assets are distributed and family and/or beneficiaries are informed of the individual’s death as well as their written wishes. The primary reason why individuals would want to avoid probate is because of its public nature. The worth of an individual’s assets and their value all become public property when sent to probate court. However, if you ensured a well-drafted Living Trust prior to your death, you may not have be able to completely avoid a court-managed administration. This is the most beneficial route because it grants an individual full control of the designation of their assets. Moreover, the probate process is a lengthy and time-consuming one. This is especially disadvantageous to beneficiaries because assets are tied up during a probate and are essentially put on hold until distribution is approved.
Probate procedures will vary depending on a state, and therefore, each case must be examined on an individual basis. However, there are some common steps that must take place during all probates, including:
• Request an appointment–In most cases an Executor or Administrator will hire a probate lawyer to file a Petition for Probate.
• Notices to Heirs/Creditor claims–If a Will is present, the probate lawyer will notify all persons mentioned in an individual’s Will.
• Probate Hearing/Court Approval–A hearing may take place a few weeks following the filing of a petition and will examine the validity of a Will (if one should be present). If no objections take place, the Court may choose to approve the petition.
• Assets Managed, Paid, and Valued–The personal representative will manage the assets and ensure that all existing debts are paid and that tax returns are filed. If a Will was drafted, the representative may also have to sell real estate and other property assets.
• Assets Distributed–A report must be filed after all debts have been paid on behalf of the estate. A judge will then grant the representative the authority to divide the remaining property and assets according to the deceased person’s Will.
Q: What is a Living Trust?
Simply put, a Living Trust is a trust that you create while you are still living. A Living Trust allows you to manage your assets, such as: bonds, your home, bank accounts and stocks, while you are alive. This is done by naming yourself a Trustee and thus allows you to have full control and management of your assets while you are living. When you are deceased, these assets are then transferred to your chosen beneficiaries. A Living Trust varies from a Will primarily because of the ability to amend, change and even completely terminate its existence. Furthermore, unlike a Will, a Living Trust becomes effective immediately after your death.
Q: What are the advantages of having a Living Trust?
There are several advantages to drafting a Living Will. One of the greatest advantages is the ability to control your assets while you are living, by naming yourself a Trustee, while simultaneously designating a successor Trustee(s). Moreover, a Living Trust allows for the immediate transfer of assets after your death. This facilitates the transfer process because there is no need for court interference. In addition to saving money and time, a Living Trust can mean that you will not have to undergo an expensive and time-consuming probate process. With a Living Trust, your family and loved one will be able to manage your assets in a private, cost-effective manner.
Q: Will I lose any control over my property if I create a Living Trust?
Your ability to control your assets will not be affected if you choose to create a Living Trust. In fact, one of the many benefits of a Living Trust is the ability to control and manage your assets while you are living. You may choose to name a successor Trustee who will manage your assets in the event that you become incompetent. This authority however, does not affect or override the control over your assets.
Since a Living Trust is revocable, you are allowed to alter it or modify it at any given moment. With a Living Trust, you do not have to file a different set of income tax returns or obtain any new identification numbers. When you are no longer competent enough to exercise control over your assets, your durable power of attorney will take effect. This will allow your beneficiaries to act on your behalf according to your written instructions. Lastly, when a person is deceased, their Living Trust can no longer be changed in any way, and the successor will then proceed to execute the deceased person’s wishes, including the distribution of assets to beneficiaries.
Q: Do I have to transfer all my assets to my Living Trust?
There is no need to transfer all of your assets to your Living Trust. Cars, IRAs, and assets with beneficiary designations such as life insurance policies, do not need to be transferred. Generally, the higher the value of an item, the more costly it will be to probate it. Therefore, you want to ensure that your most valuable assets are included in your Living Trust.
Furthermore, money from most retirement accounts will transfer automatically and without probate. These accounts are typically transferred to the designated beneficiaries. POD or “payable-on-death” accounts and “Totten Trust” accounts also do not need to be transferred into your Living Trust if a beneficiary has been selected. Upon structuring your estate planning, it is highly advisable that you seek the counsel of an experienced attorney who is skilled in the complexities and intricacies of retirement accounts in order to ensure that you are adhering to regulations.
Q: If I transfer title to real property to my Living Trust can the bank accelerate my mortgage?
If you are still living in your home, Federal Law states that financial institutions cannot accelerate your mortgage when you transfer property to your Living Trust. There is one exception to this law, however. According to the Germain Act, a residential real estate that consists of more than five dwelling units cannot be protected under this legislation. However, a majority of those people who own five unit dwellings, own them through a business and not as an individual. Therefore, the aforementioned dwelling exception does not apply.
David F. Anderson attorney at law located in Miami, Florida specializes in long term care, Condominium law, Medicaid planning, Corporate structures, Residential real estate, Asset protection, Commercial real estate, Family law, Title insurance, Bankruptcy, Mortgage law, Association Law throughout Dade County, FL and the surrounding area