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How To Avoid Probate (Will Substitutes)

Assets That Pass By The Terms Of A Trust

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Assets that are put in a trust while you are alive do not go through probate.

A trust is a legal entity that is like a paper bag in which you've put whatever assets you want. On the bag, you put instructions for use of the contents. You can hold onto the bag, or give it someone else. The person that holds the bag must follow the instructions.

Trusts can generally do everything a Will can, and sometimes they can do things that a Will cannot. For example, a trust can be set up to hold assets for a minor beneficiary. It can pay for certain expenses which are defined by the grantor (such as education or medical expenses) until a certain age, when either the income or principal or both are passed to the beneficiary.

A trust can be created while you (the "grantor") are alive, in which case it's called an "inter vivos" or  "living trust."

A trust can also be created by the terms of a Will, in which case it's called a "testamentary trust."

Living trusts can be either "revocable" or "irrevocable."

  • A revocable trust can be revoked (cancelled) or changed by the grantor. Things can be taken out or put into the trust. Instructions can also be changed.
  • An "irrevocable" trust cannot be changed after it is created. These trusts are used to avoid estate taxes as well as probate. If you would like to check to see if estate taxes are an issue for you, see Estate Tax.

Revocable Living Trusts are often used to avoid probate of the assets placed in the trust. The trustee whom you designate to serve upon your death distributes assets to the beneficiaries as described in the trust without court involvement.

Writing a Revocable Living Trust is a lot like writing a Will. However, with a trust you must also actually transfer ownership of your assets to the trust. Since you can designate yourself as trustee, you still have full control of the property. For a discussion on using a living trust to avoid probate, see Revocable Living Trusts.

Although there are books and forms available to teach you how to create a trust, it is not advisable to set up a trust without at least speaking with a qualified attorney.

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