Individuals who are engaged in the process of estate planning have a lot of decisions to make, and one of them is going to involve their primary vehicle of asset transfer to the next generation. Some folks think estate planning and they think “last will.” That is one way to go about it but there are other options as well. Many people choose to use a trust, such as a revocable living trust, as their vehicle of asset transfer. There are a number reasons for this – the most common being a strong preference to avoid the process of probate.
Probate is something that people try to avoid for four central reasons. One of them is because it is expensive; probate can sometimes consume as much as 3-5% or more of the total value of your estate. Another reason why people avoid probate is because it is time consuming, and your heirs will not receive their inheritances until the process of probate has run its course.
Thirdly, probate is a public proceeding. Anyone who has an interest in contesting your will can do so before the probate court. This possibility can be avoided through the creation of a trust which enables a private transfer of assets that cannot be contested in a public forum.
Finally, any assets you own in other states would be subject to an ancillary probate. In effect, you would have multiple probates, the primary probate in your state of residence and another in each state where you own property.
Because of the pitfalls inherent in the probate process many people do indeed choose to utilize a trust as their primary vehicle of asset transfer. There is however one potential difficulty in that you may acquire property after creation of the trust and not title that asset in the name of the trust, for one reason or another.
The way this is addressed is through the creation of something called a pour-over will. This document simply states that any property that you have remaining after you pass away that has not already been placed into the trust shall indeed be conveyed to your trust at the time of your death. It names your trust as its beneficiary. Caution: while the pour-over will transfers any non-trust asset into your trust at your death, thereby avoiding any distributions through the laws of intestate succession, that asset would have to go through probate.