When you make plans for your estate, one of your primary concerns might be to make the process as simple and easy on your loved ones as possible. And one of the ways to do this is to try to avoid probate when necessary.
Probate is the court-supervised administration of an estate upon someone’s death and is used to transfer assets from the decedent to their beneficiaries. But probate only deals with probate assets – assets solely owned by the decedent in his or her individual name.
Assets owned as “tenants by the entirety” with a spouse, “with rights of survivorship” with a spouse or any other person, assets with named beneficiaries (i.e. life insurance or retirement accounts), and assets that are “payable on death” or “in trust for” a designated beneficiary can avoid probate.
So can assets held in a revocable or living trust.
How does this work?
Well, assets in a living trust can avoid probate because, with a trust, you are transferring ownership of those assets to the trust itself – they no longer legally belong to you after your death. However, you get to decide the terms of the trust and who will be trustee (it could be you, another person, or a bank or trust company). Upon your death, the trustee is responsible for handling all taxes and claims and distributing your assets according to the trust agreement.
But in order for any of this to take place, you have to “fund” your trust by formally transferring and changing ownership of the assets to the trust before your death. So, with that in mind, let’s look at the kinds of assets you can transfer to a living trust.
Real estate. Your house and any land might be one of the most valuable assets you own. For that reason, you might be able to save on probate costs by transferring your real estate into a trust. Even if you still owe money on your property, you can still put it into a trust. The loan will simply follow the property into the trust and be passed on to the beneficiary. Remember, though, this is only if the real estate is solely in your name. If you co-own the property, you may not need a trust.
Valuable items or collections. If you are a collector or have certain items that are deemed valuable, you can put them into a trust. Precious metals, works of art, antiques, furniture, stamp or coin collections, or anything that has value can be transferred into a trust to avoid probate and be distributed to the rightful beneficiary.
Bank accounts. Bank accounts can be put into a trust. All you have to do is make sure the paperwork held by the bank is changed to show that it is owned by the trust. You may also be able to add a payable-on-death beneficiary if you don’t want to use a trust to avoid probate.
Small business interests. If you have a small business and want to be able to transfer those business interests to a beneficiary quickly, you should use a living trust. Depending on the type of business organization you’re dealing with, you may have different options or issues.
- Sole proprietorship: If you have a sole proprietorship with all the business assets held solely in your name, you can transfer the business to a living trust. Additionally, you should transfer the business’ name too.
- Partnership: If you have a partnership, you should be able to transfer your share of the partnership to a living trust. When you do this, you will also have to change the partnership ownership certificate to reflect that the trust owns your share.
- Closely held corporation: You can usually use a living trust to transfer your shares in a closely held corporation by naming the stock in the trust document and then having those stocks reissued to the trustee. If you want to do this, make sure you’re allowed to transfer your shares to a trust and that you will still have voting rights.
- Limited liability company (LLC): Before you can transfer your interest of an LLC to a living trust, you will need the consent of all the owners or a majority of the owners first.
What about other assets?
Well, there are certain assets that might not benefit from being in a trust, but there are other ways to keep them out of probate. For example, you can’t transfer cash to a living trust. But you can transfer ownership of a cash account to a trust. So if you want to leave $3,000 to your sister, you can put that money into an account, transfer it to the trust, and name your sister as the beneficiary of the account in the trust document.
If you have further questions regarding a living trust and what assets can and can’t be transferred to that trust, contact an experienced Florida trust administration attorney for more information.
About the Author:
Christopher Q. Wintter is the founder of Wintter & Associates, P.A. and a board-certified expert in Trust and Estate matters by the Florida Bar. With more than 24 years’ experience as a practicing attorney, he also serves as an instructor and faculty member for the National Institute of Trial Advocacy (NITA)—the nation’s leading provider of legal advocacy skills training to practicing attorneys—and has earned the AV® Preeminent™ rating with LexisNexis Martindale Hubbell. He was also selected for inclusion in Florida Super Lawyers for 2011 and 2012 in Estate and Trust Litigation.