Can I Avoid Probate in Utah? (estate planning basics)

May 18, 2015 - Posted by: admin - In category:

taxes - No Responses

In some ways, probate can be likened to tooth decay–both are totally preventable with a little care and planning.

For a great many people, probate is a dirty and scary word, even though very few of such individuals actually understand probate. Yes, probate generally has a bad name and a bad reputation. Some of this bad publicity is deserved, but much of it is not deserved.

As to the question of probate avoidance, there are actually several legal and proper planning methods that will enable you (and your heirs) to totally avoid the probate process. With regard to your life insurance and retirement accounts, you have the option to designate beneficiaries of such assets. By properly arranging for such beneficiary designations, upon your passing, such assets will go directly to such named beneficiaries and therefore do not become part of your estate after your death. Since these are not assets of your estate, there is no need to involve such assets in the probate process. Remember that probate is needed in circumstances where there are assets in the name of the person who has died. Remember also the critical importance of getting beneficiary designations completed correctly with the applicable life insurance company and/or retirement account custodian.

Continuing with the theme of how to avoid probate, the proper use of living trusts is another very good method of avoiding probate. To tie into the prior paragraph, we normally use such living trusts as conduits for life insurance proceeds and retirement accounts, for a variety of reasons. To summarize a very large topic, upon the creation of a living trust (called such because it is a trust created during your life–contrasted with a testamentary trust, which is created through a Will following death), all applicable assets are “funded into” such living trust, which then holds such assets until they are utilized in accordance with the plan set forth in the trust agreement by the maker of such a living trust. As we noted above, probate is needed in circumstances where an asset is titled in the name of a deceased person. In that instance, it normally takes the probate court to re-title such asset. With a living trust, if the asset has been titled in the name of the trust prior to the death of the trust maker, then such asset continues to be titled in the name of the trust following the death (or disability) of the trust maker. Therefore, in these circumstances, there is no need to go to probate court to re-title assets and the duly appointed successor trustee is authorized to manage and distribute all such trust assets in accordance with the terms of the trust agreement.

One more item of caution on the point about using living trusts to avoid probate–namely, this works only in circumstances where the applicable assets have actually been funded into the living trust and such assets (or the replacements for such assets) have been kept within such living trust over time.  It is a VERY, VERY, VERY common occurrence for us to talk with people who have existing trusts that are either partially or totally unfunded–meaning the assets for which they are seeking protection through the use of their living trust are not connected to their trust and instead, their trust is the legal equivalent of an “empty barn.” Always remember that assets not funded into a trust (and not otherwise eligible for distribution by law or through beneficiary designations) are not protected by the trust and in the common instances of the empty barn trusts, such trusts are worthless. The good news is that if this issue is identified before it is too late, it is an easy problem to fix.

As always, please contact us with questions about this and/or related items.

We are here to help!!

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