Avoiding Probate: Pour-over Wills and Trusts

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HOW CAN I AVOID PROBATE? The most common question I have received when helping people plan their estate distribution is this "How can I avoid probate?" The short answer tends to be: "Put property in trust."

Although trusts may not be appropriate for all individuals, for example those with a large outstanding mortgage or assets of only a few thousand dollars, trusts can be very useful for a large number of individuals. More importantly, if drafted correctly many trusts can avoid the lengthy probate process which may take as much as 6 months OR MORE before a beneficiary can use, sell, transfer, or assign that property.

WHAT IS A TRUST? Simply put, a trust is a document that tells an appointed individual of your choice, the Trustee, how to handle your property, The Estate. This can be done by drafting deeds to transfer property to the trust, changing beneficiary declarations to the Trust's name, and most importantly - by drafting a Trust Agreement (or Trust Declaration). Although a trust is not a tremendously complicated document, its execution and drafting have a huge impact so many individuals should consider hiring an estate planning lawyer for this purpose.

HOW DOES A TRUST IMPACT TAXES? Most lawyers do not have a CPA license, nor do they know the Internal Revenue Code with expertise. Typically, if you place property in a revocable/living trust, and you have only a few million dollars in assets, then a trust will not be much different than a will for tax purposes. But before making any decisions regarding taxes, you should always contact a skilled accountant or tax preparer who will have greater familiarity with the Internal Revenue Code.

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