Using Living Trusts to Avoid Probate

Using Living Trusts to Avoid Probate

People work for many years, scraping and saving, so they can leave something behind for their children and their grandchildren.  Why do they work so hard?  It's not only to have things when they are here, but to leave something behind.  Understandably, they don't want their hard-earned savings and assets to wind up as fees for probate lawyers.

Probate is a process where the estate of a deceased person or "decedent" is process after he or she dies.  This process will determine where the assets and property of the decedent will end up.  Probate can be a lengthy and expensive process, using up assets that the decedent wished to see go to his or her heirs or beneficiaries.  If the decedent leaves a will, or is "testate," then the probate court will appoint the executor or personal representative to oversee the process of inventorying the assets and properties, collecting the claims of debts against the estate, then paying all legitimate debts and estates and other taxes.  The executor or personal representative will then distribute the assets and properties to the heirs and beneficiaries according to the wishes of the will and the inheritance laws of the state.  However, if the decedent dies without a will or "intestate," then the court appoints a personal representative who does all of the same things and awards the assets according to the inheritance laws of the state.

Because the probate process can be expensive, costing up to 5 percent of the value of the estate, then most people want to find ways to avoid probate court for their asset and property.  This is where the Living Trust comes in.   Living Trusts will not save you a penny when you are alive, but can be the solution of avoiding many costs associated with probate.  When you leave a Living Trust, you leave a document that will hold your property as a "trustee," allowing your family members to quickly and easily transfer your property, without going through the process of probate.  This way, more of the property that is left in an estate will go to the people who were intended to inherit it.

There are two common types of Living Trusts. 

The first type of trust is the basic Living Trust, for an single person or couple who wants to avoid probate.  The Living Trust is a revocable trust that is established during the life of the grantor and is used to protect and place some or all of the grantor's property.  If the grantor is married, the basic Living Trust does not effectively protect the property by using the personal estate tax exemption.  This amount now that is allowed of a decedent's property that passes to his or her heirs without state taxes is 1.5 million dollars worth.  Because of this lack in the basic Living Trust, it is recommended that married couple who have substantial assets use the second type of Living Trust, which is the AB Living Trust.

The AB Living Trust is a trust that is designed to make sure that each spouse can take advantage of the personal estate tax exemption, which is currently 1.5 million dollars in assets.  This type of Living Trust also still allows the spouse to use the assets of the decedent during the remainder of his or her lifetime.

The basic Living Trust or the AB Living Trust are just two ways to avoid the pitfalls of the probate process.  Unless you will owe a lot in federal estate taxes upon your or your spouse's deaths, the basic Living Trust is probably all that you will need to protect your assets and property, because fewer than 2 percent of all estates in the United States of those worth more than 2 million dollars, owe estate tax.