Probate is the judicial process of administering the estate of a deceased person. During this process, the Surrogate’s Court decides the legal validity of the deceased person’s Last Will and Testament and grants its approval for the executor to act on behalf of the estate. After probate is granted (which can take months), administration of the estate can take place, including the resolution of all claims and distribution of assets under the Will. The probate of an estate is often an onerous, lengthy and costly process, as those who have experienced it will undoubtedly attest. The best advise that I can give to a prospective client: get out of probate.
A revocable trust may be used as a substitute for a Will and is often favored as a mechanism to avoid the probate process upon an individual’s death. The revocable trust can also provide for the management of the assets of an individual (called the “grantor”) both during his or her lifetime and after death. Like a Will, a revocable trust dictates the distribution of the grantor’s assets to his or her beneficiaries upon the grantor’s death. The terms of this type of trust may be changed or revoked by the grantor at any time, and allows for the designation of any individual(s) or corporation(s) as trustee, including the grantor, his or her spouse, an adult child, a close friend, an attorney, a trusted advisor or a corporate trustee. A revocable trust is beneficial in the event the grantor becomes incapacitated or incompetent, as the trustee (or successor trustee) is able to seamlessly and immediately manage the grantor’s assets and provide for his or her needs, without court intervention.
A revocable trust can offer the following advantages over a Will:
manage and protect assets during the grantor’s lifetime, including in the event of incapacity or incompetence;
provide continuity in the management of the grantor’s financial affairs following his or her death;
control how, when and to whom assets are to be distributed;
avoid the costs and delays of probate;
provide added protection from court challenges (such as Will contests); and
ensure privacy in the handling of the grantor’s financial affairs and estate (a Will is a public document; a revocable trust is not).
Revocable trusts should be prepared in conjunction with a pour-over Will to ensure that, upon the grantor’s death, any assets that remain in his or her individual name, or were inadvertently left outside the trust, will be transferred to the trust for distribution in accordance with the terms thereof. In addition, the pour-over Will is used to name the grantor’s executor and the guardian(s) for any minor children of the grantor.
While a revocable trust does offer significant advantages, successfully creating and funding such a trust does require that the grantor transfer his or her property into the name of the trust. For many assets, this can be a relatively simple, yet slightly burdensome task. Items with title documents, such as real estate, must be retitled so that the owner of the property is the trust.