Can a Testamentary Trust Get an Estate Out of Probate? | Suite101 ...

Testemenary trusts povisions in a will take the es - MASSACHUSETTS & RHODE ISLAND LGBT WILLS AND TRUSTS

A number of drawbacks to probate proceedings have given rise to testamentary trusts as a increasingly popular alternative to the last will.

Probate is the proceeding where the court, upon validating a will, distributes the property of the estate according to the terms of the will. While the main advantage to probate is that it provides a short time period for a creditor to sue an estate, estate planners generally prefer to avoid probate for several reasons. Probate can be very expensive and often averages between 3 and 10 percent of the estate value and probate records are open to the public. Commonly unknown outside of estate planning, the testamentary trust is merely an alternative to a will, and the most straightforward way to avoid probate. Like a will, a testamentary trust transfers property to beneficiaries. The important difference is that, while transfers under a testamentary trust occur automatically, transfers under a will must be ordered by a probate court.

Testamentary Trust

A testamentary trust transfers the assets of the estate to the person specified in the instrument, upon death of the grantor. The provisions of a testamentary trust assign all the estate property, not under a title, to the trust. Furthermore, the assets under a title, such as homes, cars and checking accounts, must be re-title by the grantor into the name of the trust. Any assets that are not transferred to the trust will be subject to probate. (2)

Revocable vs. Irrevocable

While the revocable testamentary trust is among the most popular methods, because the grantor can revoke it at any, the value of assets under the trust will be added to estate tax. In contrast, the right to revoke the trust is eliminated in an irrevocable testamentary trust. Therefore the value of trust assets are not included in the estate tax resulting in a lower estate tax. (2)

Joint Tenancy

Similar to the testamentary trust, property held under a title of joint tenancy are automatically transferred, upon the grantor?s death. Thus, joint tenancy can be used to keep assets out of probate. Assets under a title of joint tenancy, such as houses, securities and bank accounts, are owned in equal and undivided shares by the joint tenants. When a joint tenant dies, his rights to the assets automatically pass to the surviving joint tenants. Those assets are not included in decedent estate and avoid probate. (3)

Outside the Estate

Because probate catches only the assets owned by the decedent upon death, life insurance benefits, payable on death accounts, retirement plans, and gifts avoid probate. Proceed from a life insurance policy pass directly to the beneficiaries named on the policy. Be sure not to designate your own estate as the policy beneficiary, this will cause the proceeds to be subject to probate. With a payable on death account the assets in the account bypass probate and pass directly to the beneficiary. The beneficiary obtains the right to the account funds upon the grantor?s death. (4) Retirement plans, including IRAs, profit-sharing and 401(k) plans, allow a beneficiary to receive the remaining funds upon the grantor?s death of the grantor. Gifts, made during one's lifetime are not subject to probate. (5)

BIBLIOGRAPHY:

(1) Legalzoom.com: Do you Know the Top Reasons to Avoid Probate?

http://www.legalzoom.com/planning-your-estate/estate-planning-basics/do-you-know-top

(2) WebFinance, Inc.: Revocable Living Trust -

http://www.businessdictionary.com/definition/revocable-living-trust.html

(3) WebFinance, Inc.: Joint Tenancy

http://www.investorwords.com/13471/joint_tenancy.html

(4) WebFinance, Inc.: Pay on Death

http://www.investorwords.com/8665/pay_on_death.html

(5) The Kiplinger Washington Editors: Two Easy Ways to Avoid Probate

http://www.kiplinger.com/columns/fitness/archive/2002/ff021016.htm

Copyright Frank Rappa. Contact the author to obtain permission for republication.

Source: http://frank-rappa.suite101.com/can-a-testamentary-trust-get-an-estate-out-of-probate-a392544

defiance acc mayweather vs ortiz ncaa football 12 ncaa football 12 direct tv lion king