Hello friends! All too often, the families we serve at Clock Funeral Home and Cremation Services (our family’s funeral home), at some point during the arrangement conference make the statement that their loved one had a will. When I hear this, I always become concerned, as a “Will and Last Testament” is only one of many pieces of the puzzle, so to speak, necessary for asset preservation and allocation. This blog is devoted to understanding why a “Living Trust” is paramount for distributing your #assets and minimizing the amount of taxes paid upon our #death in #probatecourt.
The Difference Between a Will and a Trust
A standard last “Will and Testament” is a document that lists the deceased’s assets and
stipulates how the assets should be distributed, under the authority of the probate court. In layman’s terms, who gets your stuff!
A “Living Trust” is a legal tool that transfers a person’s assets into a #trust. This process happens
after the grantor’s (the person who owned the stuff) death. This transaction occurs when the
successor trustee (person who was named to control the trust after the primary trustee
died) will settle the estate in probate court so long as the trust was
What this means, is that “all your stuff” (personal and financial items regardless of worth) are
transferred (listed/itemized) inside your trust.
Smith Family Trust
John’s gold Rolex watch
Marie’s Lenox China
John’s Ping Golf Clubs
Marie’s Mink Fur
ABC Bank Checking Account of John’s beneficiary on bank account is Smith Family Trust
A Trust is Only as Good as its Funding
Details are the key to a trust. If the trust was not properly #funded, meaning listing the physical
items or ensuring that the financial assets listed the trust as beneficiary, the entire intent of
having a trust is defeated.
Many times people try to cut costs with an attorney by having the documents drawn up, with
the intent of funding the trust themselves. The vast majority of the do-it-yourself trust funders
end up with an improperly funded trust. When this occurs, those left behind are cleaning up the
trust and left to pay more #probate #taxes than necessary. Hence, the entire intent of #protecting
#assets and making it simple for those left behind is defeated.
Something to Think About
Like anything else – you get what you pay for when hiring an #estate or #eldercare attorney. It’s all about the attention to detail. If you have to pay more to ensure your trust is funded, it might be worth the extra cost. At minimum, when hiring a professional to create your trust, ask these questions:
1. Do you fund the trust, or is that something I have to do?
2. Is there a cost difference if you fund the trust?
3. If I fund the trust, will your office review it to ensure it’s done correctly?
Note: 68% of Americans do not have a Last Will & Testament. ~ Based on a recent study posted May 19, 2020, in the “The Conversations” blog post
Five Key Facts to Know About a Will, Trust, and Probate
1. A trust never dies. It is an entity, not a person. It must be dissolved.
2. A will expedites the probate court process; it does not eliminate it!
3. To reduce probate court costs, the goal is to have probate court involved as little with
the distribution of assets.
4. A Trust customizes asset / property allocation.
5. A Trust minimizes both federal and state taxes.
Want to Save Money? Avoid Probate Court.
It’s important to know that “Probate Court” has nothing to do with taxes or property value. It
has everything to do with ownership of property.
What is Probate Court?
Probate is a protocol within our court system that was established to #protect a family and its heirs, as well as creditors, upon the death of a #family member. It was originally designed to keep the deceased’s acquired wealth within the family as a legacy. The word probate means “to prove”. This is where a “Last Will and Testament” or a “Trust” comes into play. These documents are tools that prove what the deceased’s assets were and how the deceased wished those assets to be allocated after death.
Keep this is mind:
- When a person dies without a will, their estate is intestate. This means the state law
determines how the decedent’s assets will be distributed. If no will exists, the court is
given the jurisdiction to appoint an entity to oversee all matters concerning the estate
until it is considered dissolved or closed.
- When a person dies with a will, their estate is controlled by the will.
What Does Probate Court Do?
Probate sees to it that upon a person’s death, all of his or her bills are paid, and outstanding
debt is settled. After all creditors are paid, probate will then legally transfer property to
whomever it considers to be the next of kin.
In cases where there are minor children, probate court usually follows directives in the will in
determining who is awarded guardianship of the children and will ensure that the children’s
financial interests are addressed.
Four Major Probate Concerns
1. Problems within probate court almost always begin with family. In many families, a battle begins when a person dies without a will or trust. This is especially true in today’s world of blended families and single parents. Conflict also often occurs between blood and legally adopted siblings. If a person dies without a will, probate laws/court determine who the successor or heir(s) should be. Sorting out who is the next of kin is not necessarily an easy or clear-cut task.
2. Anything that goes to probate court becomes public record that anyone can access. Sooner or later, each state’s probate court records will all be available online. One of the primary reasons people place their items in a trust, is to keep their personal financial/material affairs from becoming public record.
3. All probate court fees are directly deducted from the estate prior to a settled distribution.
4. Probate courts at times can be backed up, and settlement is not a timely process. If a family member decides to contest the court’s decision, weeks can turn into months, and it’s not uncommon for months to turn into years before a settlement is reached. When this occurs, the real winners are usually the lawyers and the court itself, which gets the processing fees—not the next of kin, who often discover the estate’s worth is whittled away before any settlement is reached.
One of the Best Kept Secrets About Probate
Most people are unaware that probate court judges are envied by their judicial peers. Why? In
some states, part, if not all, of their retirement is funded by the fees that are collected in
probate court. Each time probate fees are paid to the court; a portion is directly contributed to
a pooled retirement plan.
In closing, we’ve all heard Ben Franklin’s adage that nothing is certain, but death and taxes. Ben
made this observation in 1879, and it stands true today.
Thank you for taking time out of your day to read my post. If you found it helpful, please feel
free to share with a friend or leave a review. If you have any questions or a topic you would like
me to write about, email me at email@example.com.
PS. My new podcast “I Woke Up Dead…Now What” is launching soon, please look for the “Probate Discussion with Eldercare Atty Kathleen Flammia” and me, where you listen to your podcasts.