Avoiding Probate Court and Trusts

People who give serious thought to their Estate Planning often want to take the steps necessary to enable their estate to avoid Probate Court when they die.  Let’s review the effective ways to avoid Probate Court and how a Living Trust may be the best alternative to that end. 

Quick review:  Generally Probate assets are the accounts, cars and land registered in a person’s name with no prior arrangement for transfer of ownership upon death.  In other words the assets without a joint owner or designated beneficiary.  So when the owner of the asset dies, we need the Last Will and Testament to tell us who gets what.  The Will is then filed with the Probate Court and, if necessary, an executor is appointed to gather the “Probate assets”, pay your final bills, and transfer the remaining assets to the beneficiaries under the will.  When Courts are involved there are Court costs and usually lawyers’ fees which clients prefer to avoid.

Now let’s consider the two primary means used to avoid Probate Court.  First, using the Asset-by-Asset strategy, and second using a Living Trust.

 In the Asset-by-Asset strategy a person puts a beneficiary on all their assets.  In Ohio, not only can we make bank accounts or investment accounts transfer on death (T.O.D./P.O.D.), but we can also make homes, cars, and boats transfer on death.  Or, in the proper situation, we can create an automatic transfer by adding joint owners to our assets with rights of survivorship.  These arrangements for asset transfers are easy to create and usually cost very little or nothing, relative to the cost savings of avoiding Probate.

The problem with this strategy is what I like to call ‘estate administration by committee’.  If all your assets automatically transfer to, let’s say, your four children, who is going to be responsible for your final debts and expenses?  Who pays the taxes, insurance, and utilities until the house sells, or files your final income tax return?  And what if there is a disagreement over the listing price of your house or what to do to prepare the house for sale?  Essentially, you have to consider the personality dynamic of these beneficiaries and whether they will cooperate with each other.

In the alternative we could create a trust and put all of our accounts, houses and cars into the trust.  You can put almost any asset you own into your Trust and avoid the jurisdiction of the Probate Court.  You see trusts are recognized by law as legal entities, which can control the disposition of our assets upon death.  Accordingly, we do not need the Last Will and Testament and the Probate Court to determine who benefits from the assets in trust.

 What is great about trusts is the fact that one person, your successor trustee is in charge of liquidating all your assets, making all the important decisions and taking care of your final affairs.  It avoids the potential conflict of the ‘administration by committee’ mentioned above and can be a very effective way to avoid the costs and delay associated with Probate Court.

 However, trusts can be expensive and attorney fees to prepare trusts usually start around $1500.  But that cost can be much less than the costs associated with Probate Court and getting the assistance of an attorney is strongly recommended.  By the way, since we are avoiding Probate and the checks and balances associated with the Court’s supervision of your estate administration, we must be certain we can trust our successor Trustee.  Does he or she have the time and mind set to effectively complete the administration/liquidation of the trust?

Under the right circumstances a Trust can be a very efficient and cost effective way to avoid Probate Court.  Putting one person in charge of your estate administration will help avoid conflicts and could save your heirs thousands of dollars.

John P. Koscianski is an attorney with the Law Firm of Koscianski & Koscianski

5700 Pearl Road, Suite 302, Parma, Ohio  44129  440-845-0500

Email: koscianskilaw@sbcglobal.net

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