Avoiding Probate with a Living Trust

The main purpose of a living trust is to avoid probate. Probate is the legal process in which a will is determined to be valid, as well as determining how an executor or representative of an estate distributes the property of the person who has died. Each state has a minimum value of an estate for probate, meaning that if the estate is valued lower than the state minimum, no probate would be required. Otherwise, the assets owned generally must first go through the probate process in order to transfer funds to the heirs.

The probate process can be used to validate a will, transfer property, ensure that all debts are paid (including probate and legal fees), and change the name of titled assets from the decedent to the heirs. Probate does have its purpose; however, this process also has some significant disadvantages. For example, the process may be very expensive and ultimately can consume between 4 percent and 10 percent of the total gross estate in administrative fees.

According to several studies on the subject of probate, the average duration of the probate process is 12-18 months, during which time all the estate's assets are frozen and administered by the court. And, if a will is contested (as with approximately 35 percent of probate cases), the time and cost the probate takes to process can more than double.

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Choosing a Trustee for your Living Trust

Many people serve as trustees of their own living trusts until they become incompetent or die. Others decide they need assistance simply because they are too busy or too inexperienced or do not want to manage their day-to-day financial affairs.

Choosing the right trustee to act on your behalf is very important. Your trustee will have considerable authority and responsibility and will not be under direct court supervision.

You might choose a spouse, adult child, domestic partner, other relative, family friend, business associate, or professional fiduciary to be your trustee. The professional fiduciary could be a licensed, registered individual, or a bank or trust company licensed by the State of California. You may also name co-trustees.

Discuss your choice with an estate planning lawyer. There are many issues to consider. For example, would the appointment of one of your grown children cause a problem with his or her siblings? What conflicts of interest would be created if you name a spouse, child, business associate, or partner as your trustee? And will the person named as your successor trustee have the time, organizational ability and experience to do the job effectively?

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