By Abigail Neal, Scottsdale Trust Attorney
I often get asked “how can I use a revocable living trust to avoid probate?” My answer: by properly funding your Revocable Living Trust.
A large part of the probate process is transferring title to assets out of the name of the deceased person and into the name of the new owners (the heirs). You can imagine, if you had a parent who passed, you can hardly walk into the bank and tell the bank you are their child and to give you the money. The bank will ask to see some sort of proof that you are supposed to receive the money. This proof will come from a probate court order stating that you are supposed to inherit the money. Without it, the bank won’t give you the money. Whether or not the deceased person has a Will or doesn’t have a Will, their estate will need to go through probate to divide out the assets (although will likely go much smoother if they did have a Will!).
A Revocable Living Trust is somewhat like your own personal entity. (Do not confuse this with a business entity and the asset protection elements of a business entity.) During your life, you transfer title of your assets into the name of the trust. This is called trust funding. For example: John Smith owns property in his own name (real property, bank accounts, LLC membership, etc.). During his lifetime, he transfers all the property out of his own name and into the John Smith Revocable Living Trust. When John Smith passes, if all of his assets were properly titled into the name of his trust and there are no remaining assets left in his name, there will be no need for a probate as a court doesn’t need to order that the property be transferred to the heirs. Instead, all of John Smith’s assets are already in the trust and then are distributed pursuant to the terms of the trust.
Probate avoidance is one of the many valuable tools a trust provides. Learn more about the benefits of creating a Revocable Living Trust. When you are ready to get started, call me at (480) 699-7992.