When many people hear the phrase “trust fund” discussed, they often imagine a child of rich parents. The misconception is that trusts are only for the very wealthy, set up for their “trust fund babies” to ensure they will never have to worry about anything financial in their adulthood.
The reality is, however, that trusts can be established by people of any financial means and is a very useful instrument for estate planning. Individuals can utilize different types of trusts – including revocable trusts, special needs trusts, and pet trusts – to make sure their loved ones are immediately taken care of without having to wait until the often long, drawn-out probate process is complete.
The following is a brief overview of trusts. An estate planning attorney can provide you with more specific details for your situation and offer guidance of which type of trust would be the best choice for your family.
What are trusts?
Trusts are financial arrangements where assets and property are placed and are overseen by a named person, referred to as the trustee. There are different options for trustees and often depend on what type of trust is being set up and how the trust will be dispersed once the person who set up the trust passes away.
For example, if the contents of the trust will be turned over to the beneficiary upon your death, you can name yourself as trustee since the beneficiary will have access to the assets immediately. However, if the beneficiary is a minor child then the assets cannot be turned over to them until they are of legal age. Therefore, you will need to name someone as a trustee who will oversee the trust after you pass away and until the child is old enough to receive ownership of the trust.
What is probate?
Every state has their own laws regarding how an estate should be handled, including how the probate process should proceed. Typically, when a person dies, their will is submitted to the probate court. During this process, the court will grant the executor named in the will to oversee the estate the authority to notify all potential heirs and creditors, pay all the estate’s debts, and distribute the leftover assets to the beneficiaries. It is during the probate process that anyone who disagrees with the will can contest it. If a person does not have a will, their estate must still go through the probate process, but the court will decide who the beneficiaries are based on the laws of the state.
The probate process usually takes approximately 12 months, however, if there are issues that come up – such as someone contesting the will – the process can take much longer. In the meantime, distribution of the estate’s assets cannot be done until the process is complete.
How can trusts help bypass the probate process?
When assets or property of the decedent has been placed in a trust with a named beneficiary, these assets are not included in the estate’s probate process. This is because once a person puts assets in a trust they have created, they no longer own the assets. Instead, it is the trust that holds ownership.
Many people choose to establish revocable trusts in order to maintain total control of the assets. They are able to name themselves as trustee and can alter or even cancel the trust whenever they want. An attorney, like the skilled probate attorneys Cherry Hill relies on, can assist you with any concerns or needs you may have.
Thank you to Klenk Law for providing their insight and authoring this piece on how trusts can help avoid probate.