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By John M. Bigler Recently, while I was waiting to speak at a local college, I was debating what subject I should cover in my next column. After I gave my talk, written questions were submitted and three of them were the same: "How can I avoid probate?"
In the last few years, the idea of avoiding this court process has become popular. Avoiding probate means that all of the assets in your name at the time of your death, will pass automatically by law without the need to file a will with the court. For example, assets that are held jointly automatically pass to the surviving joint account holder and therefore, do not pass through your will. Assets held in trust or with a designated beneficiary are the same and the will is not necessary for those documents. Assets placed in a revocable or irrevocable trust with named beneficiaries also avoid probate.
Any tax savings that can be achieved in a revocable trust can just as easily be achieved in a will. If an unhappy family member believes that they have not gotten their fair share of distribution from a revocable trust, they are just as likely to contest that trust as they would to contest a will. As far as Medicaid, any assets held in a revocable trust are considered available for Medicaid purposes and are not protected. The revocable trust typically costs more to create than a will. Also, it means transferring all of your assets into the trust in which you are the trustee. Sometimes this could be unwieldy. Furthermore, my experience has been that on death, having Letters Testamentary from the Court is much more impressive for an executor rounding up assets than to be named alternate trustee of a trust that is now terminated upon the original grantor's death. My concern is that many people are being convinced that the only way to get some of the benefits such as tax savings are to execute a revocable trust, and that simply is not the case. That is not to say that a revocable trust does not have its benefits. As I have said many times, for the spouse of someone on Medicaid, a revocable trust is a good vehicle because avoiding probate can also avoid a Medicaid lien. Also, for someone who has assets in different states and for which there would have to be probate proceedings in the different states, the revocable trust can be simpler. There is also an advantage for an individual who may not have close family members and wants to specify clear instructions as to how the money in the trust could be used for the benefit of that individual if they should become disabled or incompetent. On the whole, my complaint with the revocable trust, is not so much the trust itself, but some of the people who are pushing the document as a necessity. I would urge anyone who is considering the expense of a revocable trust in order to avoid probate, to speak with their family attorney or a competent estate planning attorney before making the decision. Reprinted with permission of the Suffolk Times © 1999 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
Some thoughts: First of all, most people who are concerned with avoiding probate don't truly understand what probate is. When a person dies and leaves assets to be passed to beneficiaries under a will, then that will is filed with the Surrogate's Court and that is what we call probate. If a person dies without a will, then they have died intestate and papers are filed with the Court so that the assets can be distributed as per the law. Many people believe that if there is no will, the State will take the money, and that is not true. The State will simply dictate how the money should be distributed amongst the closest relatives.
The theory of avoiding probate is that one can avoid the expenses involved with the probate proceeding. Those who advocate avoiding probate will point to the Court filing fees and the expense of retaining an attorney. Unfortunately, some of those advocating revocable trusts have gotten carried away with claims as to the benefit of avoiding probate by setting up a revocable trust. They point to significant tax savings, the avoidance of litigation by family members and even protection of assets from Medicaid. It is important to know that all of these things are false.