AVOIDING PROBATE WITH A REVOCABLE LIVING TRUST
The most common way to avoid probate is by establishing and funding a Revocable Living Trust. This type of trust is often just called a Living Trust or a Revocable Trust. All three terms mean the same thing.
Creating a Revocable Living Trust
This type of trust is created by drafting a trust agreement and it has three primary players. The first is the Grantor (sometimes called a Settlor or Trustor), who is the creator of the trust. The second player is the Trustee, or the person you put in place to manage the trust. Ordinarily, the initial Trustee and the Grantor are the same person. The individual who takes over management of the trust when the initial person passes away or becomes incapacitated is called the Successor Trustee. When a bank or similar entity is the Trustee, they are referred to commonly as a Corporate Trustee. The last player is the Beneficiary. Often the initial Beneficiary is the Grantor and Trustee and additional Beneficiaries are named to receive the proceeds of the trust when the Grantor passes away. In the typical case, this might be the Grantor’s children.
Avoiding Probate with a Revocable Living Trust
The initial step of creating a trust does not in itself avoid probate for the Grantor. All assets owned by the Grantor must be taken out of their individual name and be placed in the name of the trust. This step is referred to as “funding the trust” and it is the second vital step which must occur in order to avoid probate with the trust. In Missouri, if the Grantor owns a home, the home can be placed in the trust by drafting either a quitclaim deed or by a beneficiary deed (the method I prefer). The titles of accounts can be changed to be owned by the trust rather than by the individual. Cars, boats and trailers can have their titles amended to add the trust as the TOD (a “Transfer on Death”) beneficiary. Securities accounts can be changed to be owned by the trust rather than the individual. By transferring ownership of these assets during life, there will be nothing to be probated when the individual dies because everything will either be owned by the trust itself or the trust will be the named beneficiary of the property. It is important to note that while we are transferring ownership of Grantor’s assets to the trust, he or she will still have control and possession of trust assets as if they were owned individually.
Trusts are Cheaper Than Wills in the Final Analysis
Wills are cheaper than trusts but only initially. That is because a will does not avoid probate. It merely provides a distribution scheme for your assets IN probate. Probate costs far outweigh the cost of a revocable living trust when the person passes away. There is also the time and uncertainty which are also costs of probate. Thus, the revocable living trust continues to be the best way to avoid probate.