by Grace Kim, Intern
If you have a legal will, you may not be as protected as you think! Although a legal will lists out and details how you want your assets distributed, your estate is still left vulnerable to the process of Probate..
So what exactly is Probate? Probate is an extremely invasive, time-consuming and expensive court process. Probate is also the reason why the concept of a Revocable Living Trust is lost on so many people. It is estimated that attorneys make approximately 25 billion dollars a year on probate costs. If there is such a readily available source of money, what incentives do less-than-stellar attorneys have in suggesting a Revocable Living Trust?
Despite this disparity, a Revocable Living Trust has numerous benefits. The biggest benefit of creating a Revocable Living Trust is the ability to avoid Probate. As stated before, Probate is a public, time consuming and expensive court process. Simplified, Probate is the process an estate goes through to re-title the assets of the recently passed estate holder to the beneficiaries. While this may seem simple enough, there are numerous steps and formalities involved in probate, all which will lead to frustration and confusion for your loved ones. There are four main frustrating downsides to the probate process:
Probate is EXPENSIVE
According to studies from groups such as the AARP, an estate loses approximately 4 to 10% of its overall value from the Probate process. This chunk of your hard earned assets goes to cover costs such as attorney fees, accounting fees and appraisal fees. Don’t let the assets you worked to accumulate fall into the hands of others seeking to profit from your hard work.
Probate is TIME INTENSIVE
The probate process can take anywhere from six months to a year and a half to be settled. While this may not seem like a long time to the attorneys who will continue to collect their fees, a year is a extremely long time for your loved ones to spend unsure of their financial security and standing.
Probate is OPEN TO BE CONTESTED.
Because Probate is a court process, it is extremely easy to contest. All anyone needs to do to contest is file some paper work, and the already long process of probate is brought to a grinding halt.
A revocable living trust however, is much more difficult to contest, as a law suit is needed to contest a trust. This makes a trust much more difficult and painstaking to contest. Instead of simply filing some paper work, the person contesting a trust must hire a lawyer to file a suit against the trust. Because most lawyers require payment upfront to contest a trust, anyone wishing to contest a trust must put up a hefty attorney fee themselves.
Probate is NOT PRIVATE
During the Probate process, every asset of an estate is listed out and valued. That includes any personal property, stock holdings or real estate owned by the estate. And as Probate is a court filing, this list is completely and freely open to the public. This will leave your estate extremely vulnerable to those seeking to unfairly profit off the confusion and frustration your loved ones will go through.
You can avoid all the consequences of Probate by simply establishing a Revocable Living Trust.
An easy way to understand a Revocable Living Trust is to think of it as a Corporation. A revocable Living trust titles all your assets under the trust, rather than under the owner’s name. Let’s put it this way, if you are the only share holder, CEO and owner of a Corporation, are you the first and primary beneficiary? Yes, but are the properties and assets of the corporation directly under your name? This is how a corporation is similar to a Revocable Living Trust. When you set up a Trust, your property and assets are titled under the trust, and you are the primary and first beneficiary. This allows your estate to avoid the Probate process, saving your family from possibly spending two years of uncertainty.