Is creating a Will a good idea?

Many people plan their estates by creating a document called a Last Will and Testament. A will is essentially a legal document that lays out how you want your assets distributed at death. A will doesn't control the distribution of all your assets. Joint tenancy property and life insurance proceeds both pass outside your will. Wills don't take effect until you die so they are no help with lifetime planning. Upon your death, your will becomes a public document when it's filed with the probate court and is available to anyone who wants to read it.

Why do so many estate planning professionals recommend a revocable Living Trust?

A revocable Living Trust is a complete will substitute. It can control all of your assets both during your life and after your death. Here's how it works: When you set up your living trust, you transfer the title of all your assets (stocks, bonds, real estate, etc.) from your name to the name of the trust. This is called "funding" the trust and is essential because the Living Trust can only manage property in its name. You name yourself as the trustee and beneficiary. That gives you, and you alone, total and complete control of all your assets. You can buy, sell, trade, do whatever you want--just like you do now.

Here's the difference, and the real benefit of it. If you become incapacitated, the person you have chosen will be able to manage your assets and finances without the aggravation, delay and humiliation of a court guardianship proceeding. When you die, the trust holds the assets, therefore, no probate for your family to endure. Whomever you name as your successor trustee will immediately gain control of your assets to distribute them according to your exact instructions.

What is Death Probate?

When you think about it, probate is not difficult to understand. At your death, your assets need to be distributed to your heirs, your debts need to be paid and any loose ends need to be looked after. You, obviously, can't sign the deeds, write checks or handle your business affairs. The probate court takes over those duties.

The probate process is a long and complicated for most families. Here are the five basic steps to settling an estate:

Step One:  Filing Petition and Gathering Material
A formal written petition to the court along with a filing fee must be submitted to the court to start the probate process. One of the probate court's first jobs is to approve or appoint someone to handle the affairs of the estate. This person is called the executor, administrator or personal representative depending upon the rules of the state and whether the decedent died with or without a will.

To keep things simple, we'll call this agent of the estate a "personal representative." Generally, the first thing the personal representative does is hire an experienced probate attorney. Although having an attorney is not always a legal requirement, it has become a practical necessity because probate paperwork and filing procedures can be very complex.

Step Two:      Publishing Notice to Creditors
The second major job of the probate court is to order that the decedent's creditors be notified so that they can present their claims to the court for payment. The law sets a time that the probate proceeding must be left open to allow creditors the chance to present their claims.  In Kentucky, the creditor period is six months.

Step Three:      Inventory and Appraise Assets
During probate all the assets in the estate may be frozen so that an accurate inventory and appraisal can be made. This means that during this period many of the assets can not be distributed or sold without written permission of the court. The court will often require formal written appraisals for many items, such as real estate, antiques, collectibles, automobiles, furniture and other valuable assets. Appraisal fees, like all expenses, are paid for out of the estate.

Step Four:     Payment of Debts, Claims and Taxes
Once all the debts and claims have been submitted and approved, they are paid from the assets of the estate. Some estates may also have death tax liability and they must stay open until those taxes are paid and the tax returns are approved.

During the entire probate process, disgruntled heirs or those who disagree with the provisions in the will can bring a lawsuit in court. These suits are called will contests. They can hold up the distribution of the estate and are often used to intimidate heirs into settling cases that have no merit.

Step Five: Final Distribution and Closing of Estate
Finally, after the court is satisfied that all legal requirements have been met, it will approve the distribution of all assets,payment of claims, attorney's fees and the personal representative's compensation and any other miscellaneous expenses. If there's not enough cash in the estate to pay claims, the judge can order that assets be sold at public auctions or estate sales."

Only after all the bills are paid will the personal representative make the distribution from the estate to the beneficiaries named in the will; or if there is no will, to the designated heirs at law. The court then closes the file.

How long does Probate take?

The slow progress of your estate through probate can be very frustrating for the family. Although this complex process usually takes at least 6 to 9 months to complete, many estates take years. Most people assume that their estates are simple and will glide through the system. Regardless of how simple an estate appears, it's very difficult to close a pull probate in less than 9 months. That's because of all the steps that must be completed to the satisfaction of the court.

Are the details of the estate kept private in Probate court?

No. All probate proceedings are open to the public. Anyone who has an interest can pull your probate file and examine your financial situation at death. The file will disclose an inventory and appraisal of every asset you owned at death. It lays out the names of all your beneficiaries and the amount and conditions of their inheritances.

Are there any other problems with Death Probate?
 

Your family may pay an emotional price in probate as well. Because the process takes so long, it can be a constant reminder of the loss of a loved one. It can also foster arguments among family members who would normally seek support form one another.

Does a Will avoid Probate?

No. In fact, a will guarantees probate. The word probate actually comes from the Latin and it means "to prove the will." All property that is controlled by your will must go through the probate court. Once your estate enters the probate process, it's in the system until the judge releases it.

Does a Living Trust avoid Probate?
 

Yes. All assets transferred to a living trust completely avoid the probate process, both during your life and at your death. Living trusts are not new. They've been successfully used in one form or another since the Middle Ages. Both then and now, the living trust has required that the owner of assets transfer title from his or her name to the name of trust. This really means changing the title to your property. For real property, it means you will sign a new deed. For other assets, you sign transfer documents changing ownership to the name of your trust. Once the process is complete, all your assets will be owned by the trust.

Your living trust has title to the assets, but don't worry, you, or you and your spouse if you're married, have complete control of the trust while you're alive. You can amend the trust or even revoke it whenever you like. But when you die, there are no assets in your name so there's no need to go through probate. The trust already has your written instructions directing your hand picked agent, the successor trustee, about how you want your estate distributed.

With a living trust, there's no need for "help" from the probate court, your estate can be distributed instantly at your death. Your trustee merely follows your instructions in distributing your estate according to your wishes.