Many people would like their children to avoid probate so that the majority of the inheritance is retained by the children without probate attorney¿s fees coming into play. In addition, probate can take a long time, and leaving property in a way that avoids probate allows your beneficiaries more immediate access to the gift. This can be done through the creation of a living trust.
What is a Living Trust?
There are two types of living trusts you should be familiar with:
- Basic Living Trust - Avoids probate
- AB Trust - Avoids probate and saves on estate taxes
How Do I Create a Basic Living Trust?
To create a basic living trust, you make a document called a Declaration of Trust, which is like a will. You name yourself as trustee. The trustee is the person in charge of the trust property. Then you transfer ownership of some or all of your property to yourself in your capacity as trustee. For example, you might sign a deed transferring your house from yourself to yourself "as trustee of the John Doe Revocable Living Trust dated January 1, 2005."
Where Do I Name the Inheriting Parties?
These parties are named in the Declaration of Trust. These choices can be changed at any time prior to death and the entire trust can be revoked at any time prior to death.
How is the Trust Property Handled Once I Pass Away?
When you die, the person you named in the trust document transfers ownership of the trust property to the inheriting parties. In most cases, this person can handle the whole thing in a few weeks with some simple paperwork. This eliminates the need for a probate court.
How Does an AB Trust Save on Estate Taxes?
Instead of leaving property outright to the surviving spouse, each spouse leaves most or all of his or her property to an AB trust. When one spouse dies, the surviving spouse can use that property, with certain restrictions, but doesn't own it outright. There is a tax savings because the second spouse never retains legal ownership of the property. To learn more about AB Trusts, click here.
Do I Need a Lawyer Experienced with Estate Administration?
In many situations administering an estate can be very complicated. The person appointed to administer the estate may have tax or legal questions that need to be answered by a lawyer or tax professional. An experienced estate lawyer will know what to do, and help guide you through the legal formalities.