Probate and Trust FAQ

All About Probate: In America & Canada

All About Probate: In America & Canada

1What is Probate, and what does Probate accomplish for Heirs?

Probate is the legal process by which property owned by a person who is deceased has been passed to his or her heirs after the death. In other words, probate is simply passing title or determining who gets what when someone passes away, either by looking at the will, or if none exist, then under the laws of intestacy, or laws that determine the hierarchy of heirs. In other words, probate affords for overall management and supervision of the distribution of the deceased person's assets in accordance with the instructions left in a Will or in keeping with the state's statutes (if a Will does not exist or cannot be located).

Administration of an estate through probate is more expensive and slower than administration under a living trust. Probate transfers legal title of property from the estate of the person who has died (the "decedent") to his or her legal beneficiaries. Probate involves identifying and inventorying the deceased person's property, accounting and appraising the property, and then paying taxes and creditors with the deceased's assets. Jointly owned property and the proceeds of life insurance, retirement accounts, and annuities pass to the surviving joint owner or the named beneficiaries without the necessity of probate. In general, property that the deceased owned individually has to move through probate in the usual fashion in order for ownership to pass to his or her heirs.

The term "probate" refers to a "proving" of the existence of a valid Will, or determining and "proving" who one's legal heirs are if there is no Will (In Testate). The process of probate determines who receives the property and/or assets of the deceased. Probate is typically overseen by an executor, if there is a Will, or by the court and a court appointed personal representative if a Will does not exist. An executor is the person assigned to administer the estate. Most jurisdictions require that the executor post a bond to protect the assets of the estate. Simply having a Will does not mean you can dismiss going through probate. Even though the Will makes the process simpler probate is still required for assets in the deceased's name.

Probate petitions are filed in the county where the decedent was living at the time of death, no matter where the person passed away. Legal hearings are usually scheduled four to six weeks from the date of filing of the petition for probate It is required that notice of the probate hearing be sent to all the decedent's heirs as well as everyone mentioned in the Will.

To avoid the need for probate, and even a Will, a living trust can be used, assuring that a decedent's property and assets are transferred to his or her heirs according to the decedent's wishes. Many families avoid probate in this manner

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2What is the average Probate time-frame, from beginning to final Probate distribution?
Probate frequently takes at least 7 to 9 months to complete the process, often a year to 15, 18 months or even longer. If the Will is being contested, probate can drag on for even longer - sometimes taking several years. Some probate scenarios take 2 years or more. Many issues affect the probate time frame - for example the size of the estate, locating beneficiaries listed in the Will, validating the Will, and appointing an executor to the estate if there is no Will to refer to.
3What court fees and legal costs are associated with Probate?
Probate expenses usually run anywhere from 3% to 7% of the total value of the estate. This includes court costs, executor's fees and possible expenses, a surety bond, appraisal fees, plus legal and accounting fees. If there is a "Will contest" expense can run even higher.
4How are Inheritance & Estate taxes owed by the deceased addressed during Probate?

With respect to federal & state taxes, a death terminates the decedent's final tax year as far as filing an income tax return is concerned, and it creates a new entity for tax purposes called an "estate." The estate has to complete and file one or more of the following for Federal taxes: Final Form 1040 Federal Income Tax return; Form 1041 Federal Fiduciary Income estate Tax returns; Form 709 Federal Gift Tax return(s); Form 706 Federal Estate Tax return.

As for the state - state income tax return and any state income tax returns during the probate period, plus possible estate tax, inheritance tax and gift tax returns may need to be filed by the executor. However, requirements vary state to state; and inheritance, gift and estate taxes have been eliminated by some states, as far as many of the smaller sized estates are concerned. Your probate attorney will be able to determine how your state's rulings specifically impact you and your family. Your executor or personal representative should also carefully look for any other real estate, personal property, business, or other state tax liabilities or concerns that may affect you and your family during probate.

No one will take part in any transactions involving such inherited property prior to the Will being admitted to probate and/or an appropriate party lawfully appointed to represent the estate. If the deceased owned real estate in his or her own name, no well-informed outside party or parties would assume title to the property, and no bank would sign-off on a new mortgage, unless the estate went through the process of probate in order for "clear title" to be approved for the new buyer.

5Why do Estates have to go through Probate? Is it required everywhere in America and Canada?

Probate is used to legally transfer title of the deceased (decedent's) property to his or her heirs and/or beneficiaries. If there is no property to transfer, there is typically no need to go through the process of probate. Another function of probate is to provide for the collection of any taxes due by reason of the deceased's death or on the transfer of their property. Probate also provides a way to pay outstanding debts and/or taxes connected to the estate, for setting a deadline for creditors to file claims (which stops unpaid creditors from pursuing heirs or beneficiaries) and for the distribution of the remainder of the estate's property to the decedent's legal heirs.

During probate certain members of an estate might insist on contesting the Will. This is allowed by the courts. Probate is also necessary to validate the Will and ensure that the Will was actually written by the decedent and that the decedent was 'of sound mind' when he or she created the Will. Even though the decedent may have made it clear in the Will who the beneficiaries are, certain relatives may want to question the validity of the Will, and have the legal right to do so. This is an issue that would come under the probate process. If the decedent left a great deal of cash, bonds, stock and/or real estate in the estate, there is always the possibility that distant relatives may enter into the picture and claim a piece of the estate, whether the Will names them as heirs or not.

Probate is used to make sure the Will was not written or dictated under adverse influences or that the Will is not a fraud; that the Will was legitimately executed by the decedent - and that he or she was of sound mind when he or she wrote or dictated the Will. When determining the validity of a Will, the court must establish if the Will is actually the most up to date Will, and that there is not a more recent Will that would then invalidate the old Will. Probate is necessary for many reasons. It is also used to ensure that the estate left by the decedent is distributed fairly and legally, in agreement with the deceased's requirements.

During the probate process, the value of the estate and assets of the decedent Will be confirmed as well as any liabilities the decedent may have: unpaid taxes, outstanding loans, mortgages and other debts. Probate allows legitimate creditors to file a claim to regain money owed to them. Probate guarantees that any assets, cash, bond, stocks, jewelry, valuables, real property, land, or business interests left to beneficiaries in the Will are legally reassigned to the beneficiaries during probate.

In short, probate guarantees that the estate is distributed fairly and properly, as dictated by the decedent's Will.

6How and where is Probate administered?
Probate usually occurs in the appropriate probate court in the County where the deceased lived.
7What is the UPC (Uniform Probate Code)? Does it affect Probate and Inheritances in all states in the U.S.?
The Uniform Probate Code, accepted by 18 states, specifies the rights of a surviving spouse when their spouse passes without a will. The rights include: If there are no parents, children, or grandchildren of the deceased spouse, the surviving one inherits the estate; if a parent survives, the surviving spouse inherits the first $50,000, then splits the remaining half of the estate with the parent(s); if a child or grandchild survives, the surviving spouse inherits the first $50,000 and then splits the remaining 50% of the estate with the child or grandchild. All states in the USA and the District of Columbia have enacted laws governing most aspects of estate planning and probate -- legal validity of wills, creation of trusts, the probate process, and more. These laws can fall under various names, often as collections of laws called "codes." The different estate and probate codes that can be found from state to state include "Decedents' Estates," "Trust and Fiduciaries," "Estate Administration," and the "Uniform Probate Code."
8Can Estates legally bypass Probate, or is Probate compulsory when Inheritances are involved?

One of the easiest ways to keep your money out of probate is a payable-on-death (P.O.D.) bank account. All you need to do is fill out a simple form, provided by the bank, naming the person you want to inherit the money in the account at your death. As long as you are alive, the person you named to inherit the money in a payable-on-death account has no rights to it. You can spend the money, name a different beneficiary, or close the account.

When you open a retirement account such as an IRA or 401(k), the forms you fill out will ask you to name a beneficiary for the account. After your death, whatever funds are left in the account will not have to go through probate; instead, the beneficiary you named can claim the money directly from the account custodian.

If you're single, you're free to choose whomever you want as the beneficiary. If you're married, your spouse may have rights to some or all of the money. If you have a 401(k) account, your spouse is entitled to inherit the money unless he or she agrees, in writing, to your choice of someone else. If you live in a community property state, chances are your spouse owns half of what you have socked away in a retirement account. (Community property states are Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin; in Alaska, couples can sign an agreement making some or all of their property community property.) If any of the money you contributed was earned while you were married, that money remains "community property," and your spouse owns half.

The Uniform Transfer-on-Death Securities Registration Act allows you name a person to inherit your stocks, bonds or brokerage accounts free of probate. It is similar to a payable-on-death bank account. When you register your ownership, either with the stockbroker or the company itself, you make a request to take ownership in what's called "beneficiary form." When the papers that show your ownership are issued, they will also show the name of your beneficiary.

With respect to your car - to name an automobile transfer-on-death beneficiary, all you need do is register the vehicle in a "beneficiary form." The new registration certificate will list the name of the beneficiary, who will automatically own the vehicle after your death. States such as California, Connecticut, Kansas, Missouri, and Ohio offer car owners the option of naming a beneficiary, right on their certificate of registration, to inherit a vehicle. If you do this, the beneficiary you name has no rights as long as you are alive. You can sell or give away the car, or name someone else as the beneficiary.

Several methods of joint ownership, such as joint tenancy, provide a way to avoid probate when the first owner dies.

Many couples conclude that holding title to their major assets in a form of joint ownership that avoids probate is all the estate planning they want to engage in, at least while they are younger. The most attractive features of this strategy are its simplicity and economy. To take title with someone else in a way that will avoid probate, you usually don't have to prepare any additional documents. All you do is state, on the paper that shows your ownership (a real estate deed, for example), how you want to hold title.

Joint tenancy with right of survivorship: Property owned in joint tenancy automatically passes, outside of probate, to the surviving owner(s) when one owner dies. Joint tenancy often works well when couples (married or not) acquire real estate, vehicles, bank accounts, securities, or other valuable property together. Setting up a joint tenancy is simple and free. However, setting up joint tenancy in Texas requires that all joint tenants to sign an agreement. If you wished to set up a joint tenancy bank account, specifying your arrangement on the bank's signature card isn't enough. A bank or real estate office should be able to give you a fill-in-the-blank form that will do the trick.

After one joint owner dies, generally all the new owner has to do is fill out a straightforward form and present it, with a death certificate, to the keeper of ownership records: a bank, state motor vehicle department, or county real estate records office.

Joint tenancy is usually a poor estate planning choice when an older person, seeking only to avoid probate, is tempted to put solely owned property into joint tenancy with someone else. Beware of certain issues - You are giving away part ownership of your property. The new owner has rights that you can't take back. For example, the new owner can sell or mortgage his or her share -- or lose it to creditors. You may have to file a gift tax return. If the value of the interest you give to a new co-owner (except spouse) exceeds $11,000 in one year, you have to file a gift tax return with the IRS (unless you're adding a joint tenant to a bank account to which you deposited the money; in that case, no gift is made until the other person withdraws money). No tax is actually due, however, until you leave or give away a very large amount (currently, more than $1 million) in taxable gifts.

A great many people err on the side of adding a person as a joint tenant to a bank account strictly for "convenience." sake. They want someone to help them out by depositing checks and paying bills. But after the original owner dies, the co-owner may claim that he or she is entitled, as a surviving joint tenant, to keep the funds remaining in the account. In some instances, maybe that's what the deceased person really intended -- it's too late to ask.

Tenancy by the entirety: In certain states, married couples often take title not in joint tenancy, but in "tenancy by the entirety" instead. It's very similar to joint tenancy, but can be used only by married couples. Both avoid probate in exactly the same way.

If you are married (California allows people to register with the state as domestic partners) and live or own property in Alaska, Arizona, California, Nevada, or Wisconsin, another way to co-own property with your spouse is through community property with the right of survivorship. If you hold title to property in this way, when one spouse dies, the other automatically owns the asset. Transferring title to the survivor is simple and doesn't require court proceedings.

Revocable Living Trusts were invented to help people avoid probate entirely. The advantage of holding your valuable property in trust is that after your death, the trust property is not part of your estate for probate purposes. (It is, however, counted as part of your estate for federal estate tax purposes.) That's because a trustee -- not you as an individual -- owns the trust property. After your death, the trustee can easily and quickly transfer the trust property to the family or friends you left it to, without probate. You specify in the trust document, which is similar to a will, which you want to inherit the property.

Trusts are defined and explored in more detail on our trust FAQ pages.

Giving away property as gifts while you're alive helps you avoid probate because if you don't own it when you die, it doesn't have to go through probate. That lowers probate costs because, as a general rule, the higher the monetary value of the assets that go through probate, the higher the expense. If you give away enough assets, your estate might even qualify for a streamlined "small estate" probate procedure after your death. (These procedures are discussed below.)

If you are considering making lots of large gifts, you should know that giving more than $11,000 to any one recipient in one calendar year would require filing a federal gift tax return. You won't actually have to pay any tax now

The creation of a Living Trust that holds legal title to some or all of your property at the time of your death is most commonly used form of avoiding probate. The Trust is a legal instrument that survives you after your death.
9Is it possible to go through Probate without a Probate lawyer?

A lawyer generally keeps the proceedings formal and professional. There are no laws that insist you use a lawyer, or probate attorney, however probate is a legal process. One mistake or missed deadline could cause a great many problems for everyone involved with the estate. The probate process has to remain error-free. An experienced probate lawyer can guide you through the probate process and make sure there are no unnecessary delays. A probate attorney specializes in the area of law related to the legal process that takes place when a person passes away. The probate attorney will file the required paperwork and appear in court on behalf of the executor of the person's estate. The probate attorney will also usually handle probate specific details such as proving that a deceased person's will is valid, having the estate appraised, and paying outstanding debts, and helping in the details of inherited property.

You normally do not need a probate attorney if your estate is valued at lass than $100,000. In this case, there are some simple forms that allow your survivors to easily transfer your property without the need for probate

10How are past debts of a decedent’s Estate dealt with during Probate?
If the deceased passes away with unresolved debts, probate typically gives creditors six months from notification of probate to file their claim. Once these claims have been filed, the remainder of assets can be distributed accordingly. Probate allows for the distribution of the decedent's assets in accordance with the Will (if there is a Will) and, similarly, deals with debts and taxes that the deceased may have owed when he or she passed away.
11Who is in charge of managing the Probate process?

The duties of the Executor or Personal Representative during probate are numerous and varied, and generally include:

(1) filing the necessary court documents to prove the decedent's will;

(2) identifying and filing an inventory of the decedent's property;

(3) having the decedent's property appraised;

(4) paying the decedent's debts and taxes;

(5) distributing the decedent's property according to the will or state law;

(6) providing an accounting to the court.

12What has to be done when there are Probate Estate assets in more than one state?

Probate petitions are filed in the county where the decedent was living at the time of expiration, regardless of where the person actually died. If a Will exists, after it is admitted to probate in his or her home state, the Will is usually submitted to probate in the other counties where the deceased owned real property. This additional probate system is called "ancillary probate". It may be necessary for a local "personal representative" to administer any "in-state" home(s) or real property. If no Will exists, "out-of-state" real property falls under the probate laws of the other state or states. If there is no Will, probate is usually compulsory in each and every county where the real property is located, as well as in the "home state".

This is exactly why, if you are now in the process of writing a Will, it would be wise to carefully specify all of your beneficiaries - taking into account any land or real property you own not only in the state you live in, but also in other states. If you do not name the beneficiaries carefully in your Will, each state will manage the disbursement of your estate and land under their in-state-specific laws, and your real property may eventually end up in the hands of parties not intended to receive this land or real property after death and subsequent probate process. A carefully written Will should serve to avoid this type of problem.

13What are the responsibilities of an Executor / Personal Representative during Probate?

The Rights and Responsibilities of the Executor and Personal Representative during probate are numerous and varied, and generally include (A) filing the necessary court documents to prove the decedent's will; (B) identifying and filing an inventory of the decedent's property; (C) having the decedent's property appraised; (C) paying the decedent's debts and taxes; (D) distributing the decedent's property according to the will or state law; and (E) providing an accounting to the court.

The main tasks of a Personal Representative are to (a) determine if there are any probate assets; (b) identify, gather, and inventory the assets of the deceased; (c) receive payments due the estate, including interest, dividends, and other income (e.g., unpaid salary, vacation pay, and other company benefits); (d) set up a checking account for the estate; (e) determine who is going to get what and how much under the Will (if there is no Will, the state's "interstate succession laws" apply); (f) value or appraise the estate's assets; (g) give legal notice to potential creditors (the procedure and deadlines for creditors to file claims vary from state-to-state); (h) investigate the validity of all claims against the estate; (i) pay funeral bills, outstanding debts, and valid claims; (j) pay the expenses of administrating the estate; (k) handle various paperwork, such as discontinuing utilities and charge cards, and notifying Social Security, Civil Service, and Veterans Administration of the death; (l) file and pay income and estate taxes; (m) distribute the remaining property in accordance with the instructions provided in the deceased's Will; and (n) close probate.

14How does Probate protect Heirs that are expecting an Inheritance?

After your death, the person you named in your will as executor -- or, if you die without a will, the person appointed by a judge -- files papers in the local probate court. The executor proves the validity of your will and presents the court with lists of your property, your debts, and who is to inherit what you've left. Then, relatives and creditors are officially notified of your death. That's how it works. And the uses of probate to protect all concerned are obvious. Probate is designed to transfer titled assets to legitimate heirs, ensure that outstanding taxes and debts are paid, and to establish if the Will left by the deceased is valid.

Probate is the best method the courts have to verify that the Will a decedent has left behind is 100% authentic and 100% valid. All titled assets that were owned by the decedent are legally transferred and distributed to the named beneficiaries through probate. Probate also helps with the payment of taxes and debts that were owed by the decedent, and these are taken from the estate. If anyone contests the Will, this is another issue that is dealt with through the probate process. The Probate process ensures that: A person's last Will and testament is dealt with fairly and in accordance with his or her wishes, and that an executor is appointed, whenever appropriate, to oversee the disbursement of assets. Assets are distributed fairly through probate, with the appointment of an official estate administrator, if there is no Will or executor of the estate.

Probate is also the best method the courts have to verify that issues regarding the validity of the Will are settled [during the probate process], before distribution of assets. Probate make certain that all of the items listed in the decedent's Will are legally transferred to the appropriate beneficiary or beneficiaries. It is also important to remember that some assets do not have to go through probate, although this depends on the laws of the state in which the Will is being dealt with. Assets such as joint bank accounts and properties that are in joint names are not included. Many states allow assets to a certain value to be excluded from probate. If the assets in the decedent's name are negligible, probate is typically not necessary.

Probate enables the decedent's debts to be dealt with through the estate, and all balances settled prior to the disbursement of the estate's assets. Probate allows for a specific time frame, generally 6 months from the inception of probate, to let creditors file their claims.

15If an heir to an inheritance in Probate is also acting an Executor / Personal Representative of the Estate, can he also accept administration fees?
16Is it necessary for all Estate assets (stocks, bonds, property, cash, etc.) to go through Probate?

All of your assets do not have to go through probate. Most states allow a certain amount of property to pass free of probate, or through a simplified probate procedure. In California, you can pass up to $100,000 of property without probate, and there's a simple transfer procedure for any property left to a surviving spouse. Real property that passes through joint tenancy or a living trust, outside of the Will, is not subject to probate.

These items, however, must be assessed through the probate process: Assets named only in the deceased person's name must go through probate. One-half of each asset registered as community property in the decedent's name with his or her spouse. The deceased person's portion or share of an asset where the asset is registered as tenants in common with other people; Assets, which are owned but are not registered, such as furniture, jewelry, etc. are appraised during probate. Some assets may be transferred without the need of probate assessment, including any assets held in joint tenancy such as land, property, vehicles, and bank accounts, any asset held in a living trust, most life insurance and retirement benefits.

During probate, you may have to sell some or all of the estate assets to pay taxes, fees and/or debts. The executor or administrator is expected to prepare a budget with an estimate of the federal estate tax, fees for the executor and attorney, administrative costs, cash bequests under the Will, and debts or claims. If there is not enough cash available, then a decision is made regarding which assets to sell. The court has to approve the sale of each asset before the executor or administrator may sell during a probate proceeding. A court order or court hearing may be necessary for different types of assets. If there is enough cash in the estate, then no assets need to be sold, but still can be put up for sale if the Executor determines this is the best course of action to take.

Although some sort of legal process is necessary to transfer legal title from the deceased's name to his or her beneficiaries or heirs, many states will allow some types of property to pass on to beneficiaries completely free of the probate process, or through a simplified probate process. The more clear and precise the Will has been written, the better the chance of avoiding a lengthy probate process, or probate at all.

Probate isn't required if the deceased/author of the Will did not own titled or considerable assets. An administrator is usually appointed to execute the Will if a family member cannot fill this function. The estate shifts to ownership by to the respective state if there is no Will and no executor or family member to execute. Moreover, if no contractual obligation exists for the deceased's half of the real property, land, assets, and so on to automatically go to the joint owner - the Will often names a different beneficiary for his or her 50% of the estate's assets. One of the more common revenue items exempt from probate are life insurance policies, There are also other items, such as annuities, that are tied to contractual beneficiaries and therefore are specifically not subject to probate. There may be a contractual beneficiary on a bank account or trust, for example - also released from having to go through probate.

Real property, land, and certain other assets can also bypass probate, up to a set financial value (as per each state's probate laws). These assets are handled in a more simple manner than probate affords. A Living Trust holding legal title to all or some of the estate's property, naming a specific beneficiary or beneficiaries bypasses probate. A "Totten Trust" naming a specific beneficiary or beneficiaries may also shift assets to the beneficiary or beneficiaries without probate. Other types of benefits, such as a life insurance policy or annuity payable directly to a named beneficiary bypass probate, IRAs, Keoghs, and 401K's transfer automatically, outside probate, to the estate's beneficiaries. POD Bank accounts (i.e., " payable-on-death")

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17What can be done if the Personal Representative managing the Probate doesn’t do a proper job?
A probate executor or administrator who is derelict in their duty during the probate process is personally liable for damages caused in the administration of the estate and actually might wind up paying for any losses out of his or her own pocket.
18How are creditors of the Estate dealt with during Probate?
As part of the probate process, creditors are notified of the death. Creditors are expected to file a claim for whatever they are owed within a certain time frame -either with the Personal Representative or, if appropriate to the respective probate of laws of that state, or with the probate court itself. Creditors' claims are either approved or rejected by the executor. If approved, what is owed is paid out of the estate. If the claim is rejected, creditors can sue the estate for what is owed. The Executor is forced to sell property to pay off approved creditor claims if there is not money in the estate.

All About Probate & Wills: In America & Canada

1If there is, or is not, a Will involved, is it always necessary to go through Probate?

Avoiding probate requires a good estate attorney and a great deal of planning. There are various ways to avoid probate, as reviewed below.

Generally it is necessary to go through probate or, in the case of smaller estates, a less formal procedure that is still under the general supervision of the probate court, before the deceased's property can be legally distributed. As long as a person passes away with a Will intact, probate court allows others to object to that Will, and will determine if that Will is valid in spite of those objections during probate. It might be possible that (A) there was a later Will (which, if valid, would replace the older Will), or (B) the Will was made at a time the deceased was not mentally competent to make a Will, or (C) the Will was the result of fraud, mistake or "undue influence" or (D) the Will was not properly "executed", or (E) the Will in question is a forgery, or (F) for some other reason (like a pre-existing contract) the Will is not 100% valid, or (G) there are numerous other claims against the estate that will affect what the beneficiaries will inherit under the provisions and requests under the Will.

No one will take part in any transactions involving such inherited property prior to the Will being admitted to probate and/or an appropriate party lawfully appointed to represent the estate. If the deceased owned real estate in his or her own name, no well-informed outside party or parties would assume title to the property, and no bank would sign-off on a new mortgage, unless the estate went through the process of probate in order for "clear title" to be approved for the new buyer.

2If I am named as an “Executor” in a Will that will go into Probate, must I accept that responsibility?
No, it's not mandatory. If you do elect to function as the estate's Personal Representative you can step down at any time, although you may have to provide a written "accounting" for the time you did do the job. An alternate Executor named in the Will is then appointed by the probate court. If no alternate is named in the Will, or the named alternates die or do not wish take this responsibility on, or a person dies without a Will, the probate court will appoint someone to serve in this position throughout the probate process.
3If the Will is contested or uncontested, how would this affect the Probate process?

The basic probate steps are generally taken by rote. The "Executor" or "Executrix" (whomever was appointed the deceased's Personal Representative) prepares a "Petition for Probate" for the court through a probate attorney who files it with the probate court. The lawyer managing the Will admitted to probate should notify all those who would have legally been entitled to receive property from the deceased if the deceased died without a Will as well as those named in the Will. This is the period during probate where parties have an opportunity to file an objection in terms of admitting the Will to probate.

Depending on the particulars associated with the Will, it is occasionally compulsory to bring back the party or parties who witnessed the deceased's signature on the Will, for verification. The probate petition hearing is set for weeks or even months after the probate is filed. If there are no objections voiced regarding the Will and the details in the Will appear to be regular and in order, the court approves the petition, appoints the Personal Representative, levies instructions on how creditors will be paid, how taxes will be paid, and covers details concerning how the Personal Representative is to file reports with the probate court with respect to the deceased's property, cash, and. Assets; as well as final distribution of the above - in compliance with the terms and conditions of the Will.

4How does the Estate proceed if there is no valid Will?

If you have begun the process of probate, and you find out the Will is missing, check with the probate court in the county of the state where the deceased resided. You can buy a copy if it is there, or hire a legal agency or attorney to retrieve a copy of the Will if you live far away. If the deceased held property strictly through a joint ownership arrangement or a Living Trust, there may not be a Will due to the fact there may not have been a need to file a Will.

5If there is no valid Will, or a Will can’t be found, how does this affect Probate?
If a person dies without a Will, they have passed away "in testate". In these cases, the respective probate court [in the county where the deceased resided] will assign a Personal Representative, or "Administrator" or "Administratix", to receive any claims against the estate, pay creditors, and distribute the remaining property to the beneficiaries in compliance with that state's probate laws.
6During Probate, what happens if the Will is contested?

A Will Contest is a lawsuit challenging the validity of a will and/or its terms. Bases for contesting a will include the competency of the maker of the will (testator) at the time the will was signed, the "undue influence" of someone who used pressure to force the testator to give him/her substantial gifts in the will, the existence of another will or trust, challenging illegal terms or technical faults in the execution of the will, such as not having been validly witnessed.

A trial of the will contest must be held before the will can be probated, since if the will is invalid, it cannot be used in the probate process. A Will may be challenged by someone who insists that the decedent lacked proper mental capacity to have executed the Will appropriately and legitimately - in other words, may have been senile, very sick or even delusionary, or of unsound mind - at the time the documents were created. That the writer of the Will was subjected to fraud, coercion or undue influence during its creation, that the Will is too vague, or that the Will is a complete forgery, or any number of alleged improprieties.

If, as a result of a serious objection or objections, the Will is deemed at this stage of probate to be invalid, the probate court may invalidate the entire Will, or only the challenged section of the Will. If the entire Will is deemed to be invalid by the probate court, the estate will be distributed under the state's probate laws of "intestacy" (i.e., as if there had never been a Will).

7During Probate, how is the Estate affected if an Heir objects to the Will?

A "Will contest" will be initiated if anyone with reasonable "standing" to object files a formal objection to the Will during this stage of the probate process. Reasons underlining proper "standing" to object to a Will might be that the Will was not properly drawn, signed or witnessed; or that the decedent lacked proper mental clarity at the time the Will was executed; or that the Will has been corrupted somehow by fraud or unwarranted influence of some kind; or perhaps the objection may insist that the Will itself is an out and out a forgery.

An objection to the Will may be driven a family member's insistence to install a different Personal Representative to manage the probate process; or perhaps someone in the family was cut out of the Will. If, for example, the Will leaves a sister 3/4 of a parent's estate and a bother 1/4, the brother receiving the smaller share of the estate has proper "standing" to call for a Will contest. Or, if a Will executed a year prior to the death of the parent is less favorable to someone in the Will than a version of the Will executed 10 years ago, that individual would be considered to have "standing" to contest the Will at this stage of the probate process.

If, as a result of a serious objection or objections, the Will is deemed at this stage of probate to be invalid, the probate court may invalidate the entire Will, or only the challenged section of the Will. If the entire Will is deemed to be invalid by the probate court, the estate will be distributed under the state's probate laws of "intestacy" (i.e., as if there had never been a Will).

8When I create a Will, how can I can assure that no one Will be able to challenge the document during Probate?
In order to protect, or "bullet proof", a Will, people should take care to have a good estate lawyer on hand when creating a Will to ensure that the Will clearly communicates what you want it to, to limit any vagaries that might arise during probate; being careful to set up the estate to minimize taxes as much as possible.

Folks Visiting HeirAdvance.Com Have Asked Our Probate Cash Advance & Trust Loan Editor A Lot of Questions. Here Are Some of the More Interesting Queries

1What exactly is "a trust"? What makes it a legal estate instrument?

A Living Trust is a revocable trust established by a grantor during his or her lifetime in which the grantor transfers some or all of his or her property into the trust.

Trusts are relationships in which a person or entity (the Trustee) has legal control over certain property (the trust property or trust corpus), but is bound by fiduciary duty to exercise that legal control for the benefit of someone else (the beneficiary), according to the terms of the Trust and the law. In a Trust the legal ownership that the trustee has is split from the equitable or beneficial title that the beneficiary has. The Trustee holds only the bare legal title to the property. If the legal and beneficial ownership merges the Trust is considered nonexistent. This can happen when the trustee becomes the sole beneficiary.

A living trust can provide you with more privacy than a will because in most states, you don't have to register it with the courts in probate. Another advantage of a living trust is that it allows you to hand over management of your assets to someone else if you become incapacitated. A Trust is typically set up by an estate attorney, although there are Trust Software products on the market now that can be used to create your own trust.

2What are the most popular forms of trusts in the US?

Many kinds of trusts are available. Trusts may be classified by their purposes, by the ways in which they are created, by the nature of the property they contain, and by their duration. One common way to describe trusts is by their relationship to the trustor's life. In this regard, trusts are generally classified as either living trusts ("inter vivos" trusts), or testamentary trusts.

Living trusts are created during the lifetime of the trustor. Property held in a living trust is not normally subject to probate (the court-supervised process to validate a will and transfer property on the death of the trustor). In Washington, because such property is not subject to probate, it need not be disclosed in the court record and confidentiality may be maintained. Such trusts are widely used because they allow the trustor to designate a trustee to provide professional management.

Under some circumstances, living trusts will allow income to be taxed to a beneficiary and result in income tax savings to the trustor. However, it should be noted that income earned by a trust established for a beneficiary under the age of 14 may be taxed at the beneficiary's parent's tax rate. The transfer of property to a living trust may also be subject to a gift tax.

Testamentary trusts are created as part of a will and must conform to the statutory requirements that govern wills. This type of trust becomes effective upon the death of the person making the will (the "decedent") and is commonly used to conserve or transfer wealth. The will provides that part or all of the decedent's estate will go to a trustee who is charged with administering the trust property and making distributions to designated beneficiaries according to the provisions of the trust.

Before the trust property becomes subject to the testamentary trust, it will normally pass through the decedent's estate. When the estate is probated, those trust assets will be subject to probate. The assets, which will form the corpus of a testamentary trust, also are potentially subject to an estate and generation-skipping transfer tax at the time of the decedent's death.

A testamentary trust gives the trustor substantial control over his or her estate distribution. It also may be used to achieve significant savings in the future. For example, by using a testamentary trust, a trustor can provide for a child's education or can delay the receipt of property by a child until the child gains financial maturity. Moreover, given the proper form of trust, property may be exempted from death taxation on the later death of a trust beneficiary. However, a generation-skipping transfer tax may still apply.

Living trusts can be "revocable" or "irrevocable." The trustor may change the terms or cancel a revocable living trust. Upon revocation, the trustor resumes ownership of the trust property.

In general, a revocable living trust is used when the trustor does not want to lose permanent control of the trust property, is unsure of how well the trust will be administered, or is uncertain of the proper duration for the trust. With a properly drafted revocable trust, you may:

  1. Add or withdraw some assets from the trust during your lifetime;
  2. Change the terms and the manner of administration of the trust; and
  3. Retain the right to make the trust irrevocable at some future time.
  4. The assets in this type of trust will generally be includable in the trustor's taxable estate, but may not be subject to probate.

    An irrevocable living trust may not be altered or terminated by the trustor once the agreement is signed. There are two distinct advantages of irrevocable trusts:

    1. The income may not be taxable to the trustor; and
    2. The trust assets may not be subject to death taxes in the trustor's estates.
    3. However, these benefits will be lost if the trustor is entitled to (1) receive any income; (2) use the trust assets; or (3) otherwise control the administration of the trust in a manner that is inconsistent with the requirements of the Internal Revenue Code.

      Since a will may be revoked or amended at any time prior to death, a testamentary trust may be changed or canceled. Revisions can be made by drafting a new will or by using a simple document called a "codicil" to make changes or additions to your will. However, to be effective, any such modifications must be executed in the same manner required for wills. The trust instrument should be explicit regarding revocability or irrevocability. If it is not, the trust will be considered irrevocable.

      A trust is a relationship in which a person or entity (the trustee) has legal control over certain property (the trust property or trust corpus), but is bound by fiduciary duty to exercise that legal control for the benefit of someone else (the beneficiary), according to the terms of the trust and the law. Thus, in a trust the legal ownership that the trustee has is split from the equitable or beneficial title that the beneficiary has. The trustee holds only the bare legal title to the property. If the legal and beneficial ownership merges the trust is considered nonexistent. This can happen when the trustee becomes the sole beneficiary.

      The trustee can be either a natural or a legal entity. There can be multiple trustees, in which case the trust should provide a mechanism for the trustees to make decisions. A trust will not fail solely for want of a trustee; if there is no trustee, whoever has title to the trust property will be considered the trustee. If the interests of the trust require it, a court of competent jurisdiction may appoint a trustee to ensure the continuing viability of the trust.

      The trust property can be any form of property, be it real or personal, tangible or intangible. The beneficiary can be a single person, multiple persons, or a defined class or group of persons, including people not yet born at the time of the trust's creation. The trustee can be one of the beneficiaries, so long as the trustee is not the only beneficiary. A trust can also be created with some charitable purpose, as opposed to having a particular person or persons as its beneficiary.

      The trust has been called the most innovative contribution of English legal thinking to the law. It plays an important role in all common law legal systems. Trusts developed out of the English law of equity which has no direct equivalent in civil law jurisdictions, however since the use of the trust is so widespread some jurisdictions have incorporated trusts into their civil codes. Civil law systems also have the concept of patrimony of affectation and the foundation that have similar independent patrimonies from their donors that trusts can have from their grantor.

      Express, implied, and constructive trusts

      Trusts can be classified in a number of ways. One of these ways is by how the trust was created. Most commonly, a classification of trusts as express trusts, implied trusts (resulting trust) and constructive trusts is used. Note however that this terminology is not accepted by all authors.

      An express trust is created where one person (the settlor) conveys property to another (the trustee) on the condition that the property will be used for the benefit of a third party or parties (the beneficiaries). The intention of the parties to create the trust must be shown clearly by their language or conduct. For an express trust to exist, there must be certainty to the objects of the trust and the trust property. Statute of Frauds provisions require express trusts to be evidenced in writing if the trust property is above a certain value, or is real estate.

      An implied trust (also called a resulting trust) is created where some of the legal requirements for an express trust are not met, but an intention on behalf of the parties to create a trust can be presumed to exist.

      Unlike an express or implied trust, a constructive trust is not created by an agreement between a settlor and the trustee; rather a constructive trust is imposed on the trustee by the law. This generally arises due to some wrongdoing on behalf of the trustee, where the trustee has acquired legal title to some property but cannot in good conscience be allowed to benefit from it. For example, the Privy Council has held that if a fiduciary accepts bribes or makes an improper profit, a constructive trust is thereby created, by which the fiduciary holds the bribes or improper profit as trustee of a constructive trust for the benefit of the principal.

      Simple or bare trusts versus special trusts

      In a simple trust (also called a bare trust) the trustee has no active duty beyond conveying the property to the beneficiary at some future time determined by the trust. In a special trust, however, the trustee has active duties beyond this.

      Private trusts versus public or charitable trusts

      A private trust has one or more particular individuals as its beneficiary. By contrast, a public trust (also called a charitable trust) has some charitable end as its beneficiary. In order to qualify as a charitable trust, the trust must have as its object certain purposes such as alleviating poverty, providing education, carrying out some religious purpose, etc. The permissible objects are generally set out in legislation, but objects not explicitly set out may also be an object of a charitable trust, by analogy. Charitable trusts are entitled to special treatment under the law of trusts and also the law of taxation.

      Fixed, discretionary and hybrid trusts

      In a fixed trust, the amount of money or other goods or services to be paid to the beneficiaries is fixed by the settlor. An express fixed trust requires a certain degree of certainty regarding who are the beneficiaries and the amounts to be paid to them, so that the trustee has little or no discretion. If this degree of certainty is not met, an implied trust exists instead. In a discretionary trust, the amount of money or other goods or services to be paid to the beneficiaries is up to the trustee, so long as the decision is made based on the beneficiaries best interests. A hybrid trust combines elements of both fixed and discretionary trusts. In a hybrid trust, the trustee must pay a certain amount of the trust property to each beneficiary fixed by the settlor. But the trustee has discretion as to how any remaining trust property, once these fixed amounts have been paid out, is to be paid to the beneficiaries.

      Specific types of trust: unit trusts, protective trusts

      A unit trust is a trust where the beneficiaries (called unitholders) each possess a certain share (called a unitholding) and can direct the trustee to pay money to them out of the trust property according to the number of unit holdings they possess. Unit trusts are primarily used for investment purposes.

      A protective trust is a type of trust that was devised for use in estate planning. Often a person, A, wishes to leave property to another person B. A however fears that the property might be claimed by creditors before A dies, and that therefore B would receive none of it. A could establish a trust with B as the beneficiary, but then A would not be entitled to use of the property before they died. Protective trusts were developed as a solution to this situation. A would establish a trust with both A and B as beneficiaries, with the trustee instructed to allow A use of the property until they died, and thereafter to allow its use to B. The property is then safe from being claimed by A's creditors, at least so long as the debt was entered into after the trust's establishment. This use of trusts is similar to life estates and remainders, and are frequently used as alternatives to them.

      Trusts Definitions provided by http://www.answers.com/topic/resulting-trust#copyright & http://www.wsba.org/media/publications/pamphlets/trusts.htm
3What is a trust estate?
The property that is transferred to a Trust becomes the Trust Estate. A Trust Estate consists of all of the property, rights and obligations that are transferred to the Trust. The Trust Estate is managed in accordance with the terms and conditions of the document creating the Trust.
4What is the difference between a Trustor, a Trustee and a Beneficiary?
There are typically three main parties to a Trust:The person who provides property and creates a trust is called a trustor. This person may also be referred to as the "grantor," "donor" or "settlor."The trustee is the individual, institution or organization that holds legal title to the trust property and is responsible for managing and administering those assets. If not designated by name, a trustee will be appointed by the court. In some cases, a trustor can serve as the trustee. It is also possible for two or more trustees to serve together, or for both an individual and an organization to act as co-trustees. Separate trustees may also be named to manage different parts of a trust estate.

The beneficiary is the person who is to receive the benefits or advantages (such as income) of a trust. In general, any person or entity may be a beneficiary, including individuals, corporations, associations or units of government.

The general duties and obligations of the beneficiary, the trustee and the trustor are summarized elsewhere in this pamphlet.

What are the duties and responsibilities of a Trustee?

A trustee - whether an individual or institution - holds legal title to the trust property and is given broad powers over maintenance and investment. To ensure that these duties are properly carried out, the law requires that the trustee act in a certain manner. In general, a trustee must:

    Act in accord with the express terms of the trust instrument;
  • Act impartially, administering the trust for the benefit of all trust beneficiaries;
  • Administer the trust property with reasonable care and skill, considering both its safety and the amount of income it produces;
  • Maintain complete accounts and records; and
  • Perform taxpayer duties, such as filing tax returns for the trust and paying required taxes.
  • The trustee must administer the trust property only for the designated beneficiaries and may not use trust principal or income for his or her own benefit. In other words, a trustee is usually prohibited from borrowing or buying from the trust, from selling his or her own property to it, and from using the trust assets as collateral for a personal debt.

    In selecting a trustee you should consider the potential trustee's competence and experience in managing business or financial matters and the potential trustee's availability and willingness to serve.

    Individuals and certain corporations (or a combination of both) may serve as trustee. Each selection offers distinct advantages and drawbacks that should be considered. For example, an institution, such as a bank, usually offers specially trained managers to provide administrative, counseling and tax services. Other typical advantages include the institution's continuity and reliability of service, and its ready availability. Most banks charge a fee for trust services, and some may not want to manage small trusts, so you may want to compare options.

    As an alternative, an individual, such as a relative, family friend or business associate, may serve as trustee. An individual, unlike an institution, may be willing to serve for little or no fee. Furthermore, this person could add a more personal touch for special understanding to the needs of the beneficiaries. However, you will want to be certain that any nominated individual has the skill and experience necessary to properly manage the trust property.

5What are the duties and responsibilities of a Trustee?

A trustee — whether an individual or institution — holds legal title to the trust property and is given broad powers over maintenance and investment. To ensure that these duties are properly carried out, the law requires that the trustee act in a certain manner. In general, a trustee must:

  • Act in accord with the express terms of the trust instrument;
  • Act impartially, administering the trust for the benefit of all trust beneficiaries;
  • Administer the trust property with reasonable care and skill, considering both its safety and the amount of income it produces;
  • Maintain complete accounts and records; and
  • Perform taxpayer duties, such as filing tax returns for the trust and paying required taxes.
  • The trustee must administer the trust property only for the designated beneficiaries and may not use trust principal or income for his or her own benefit. In other words, a trustee is usually prohibited from borrowing or buying from the trust, from selling his or her own property to it, and from using the trust assets as collateral for a personal debt.

    In selecting a trustee you should consider the potential trustee's competence and experience in managing business or financial matters and the potential trustee's availability and willingness to serve.

    Individuals and certain corporations (or a combination of both) may serve as trustee. Each selection offers distinct advantages and drawbacks that should be considered. For example, an institution, such as a bank, usually offers specially trained managers to provide administrative, counseling and tax services. Other typical advantages include the institution's continuity and reliability of service, and its ready availability. Most banks charge a fee for trust services, and some may not want to manage small trusts, so you may want to compare options.

    As an alternative, an individual, such as a relative, family friend or business associate, may serve as trustee. An individual, unlike an institution, may be willing to serve for little or no fee. Furthermore, this person could add a more personal touch for special understanding to the needs of the beneficiaries. However, you will want to be certain that any nominated individual has the skill and experience necessary to properly manage the trust property.

6How do I establish a Trust that is in line with my, and my family's, specific needs?

Depending on a number of circumstances, trusts may be established orally, in writing or by conduct. Most trusts involve a number of technical legal concepts relating to ownership, taxes and control. A lawyer can assist in explaining options, considering contingencies and preparing documents. In creating a trust, you should consider several factors and obligations, including:

  • Your personal situation, including age, health and financial status;
  • Your family relationships and your family's financial circumstances;
  • Personal financial data: personal property, real estate holdings, securities, and other property — as well as your tax situation and any debts or obligations;
  • The purpose of the trust: your goals, or what you hope to accomplish by the arrangement;
  • The type of trust, and how versatile or flexible your plans are.
  • The amount and type of property it will contain;
  • The duration, or how long the trust will last;
  • The beneficiaries and their specific needs;
  • Any conditions that must be met by a beneficiary to receive benefits (such as attaining a certain age);
  • Alternatives for disposing of assets in case the trust conditions are not met or circumstances change; and
  • The trustee, and the conditions or guidelines under which he or she will function.

Dependency exemptions, capital gains and losses, income, gift, estate and generation-skipping transfer taxes also should be considered when planning certain types of trusts. Likewise, you may want to think about naming alternative or contingent beneficiaries and trustees.

Once a trust has been established, a periodic review of the status of the trust is advisable; you may want to obtain professional assistance appropriate to the requirements of the trust

7Where would a Trust be physically located?

The location of the trust is usually determined by the residence of either the trustor or the trustee. In deciding where to establish the trust, it must be remembered that each state has different laws governing the operation of trusts and trustees' powers.

Circumstances may sometimes warrant moving the trust location. Relocation, called a "change of situs," may be desirable or necessary for either tax or non-tax reasons (e.g., the trustee moves to another state). Whether or not a move can be made, and how the move is accomplished, will be dictated by each state's laws.

Trusts Definitions provided by http://www.wsba.org/media/publications/pamphlets/trusts.htm
8Can one create a trust, serve as the trustee and also be the trust beneficiary?
Executed correctly, it is possible to create a revocable Trust in most states, serve as its’ trustee and be the trust beneficiary.
9How is a "trust agreement" different than a "declaration of trust"?

These two terms refer to a written document that sets forth the terms and conditions of the Trust. The differences between them are largely matters of style and local practice.

Typical provisions in a Trust agreement or declaration of Trust for an individual or married couple include the following:

  • a statement of the purpose of the Trust
  • the names of the Trust creator's family members
  • whether the Trust creator, or anyone else, may amend or revoke the Trust
  • who will serve as the initial Trustee(s), and who would serve, and in what order, if the initial Trustee becomes unable or unwilling to serve, in the event of illness, death or for any other reason
  • what powers the Trustee should have, in terms of investment and management, and what discretion the Trustee is to have in terms of releasing money to beneficiaries, such as for education
  • who the beneficiaries of the Trust are, or how to determine them; the Trust creator and his or her spouse are typically beneficiaries in a "living" Trust.
  • who is to receive distribution of the Trust estate upon the death of the grantor, and
  • when the beneficiaries would be entitled to receive the distributions, often at age 21, or half at age 21 and half at age 30.
10What are some of the different forms a trust instrument can take?

Many kinds of trusts are available. Trusts may be classified by their purposes, by the ways in which they are created, by the nature of the property they contain, and by their duration. One common way to describe trusts is by their relationship to the trustor's life. In this regard, trusts are generally classified as either living trusts ("inter vivos" trusts), or testamentary trusts.

Living trusts are created during the lifetime of the trustor. Property held in a living trust is not normally subject to probate (the court-supervised process to validate a will and transfer property on the death of the trustor). In Washington, because such property is not subject to probate, it need not be disclosed in the court record and confidentiality may be maintained. Such trusts are widely used because they allow the trustor to designate a trustee to provide professional management.

Under some circumstances, living trusts will allow income to be taxed to a beneficiary and result in income tax savings to the trustor. However, it should be noted that income earned by a trust established for a beneficiary under the age of 14 may be taxed at the beneficiary's parent's tax rate. The transfer of property to a living trust may also be subject to a gift tax.

Testamentary trusts are created as part of a will and must conform to the statutory requirements that govern wills. This type of trust becomes effective upon the death of the person making the will (the "decedent") and is commonly used to conserve or transfer wealth. The will provides that part or all of the decedent's estate will go to a trustee who is charged with administering the trust property and making distributions to designated beneficiaries according to the provisions of the trust.

Before the trust property becomes subject to the testamentary trust, it will normally pass through the decedent's estate. When the estate is probated, those trust assets will be subject to probate. The assets, which will form the corpus of a testamentary trust, also are potentially subject to an estate and generation-skipping transfer tax at the time of the decedent's death.

A testamentary trust gives the trustor substantial control over his or her estate distribution. It also may be used to achieve significant savings in the future. For example, by using a testamentary trust, a trustor can provide for a child's education or can delay the receipt of property by a child until the child gains financial maturity. Moreover, given the proper form of trust, property may be exempted from death taxation on the later death of a trust beneficiary. However, a generation-skipping transfer tax may still apply.

Living trusts can be "revocable" or "irrevocable." The trustor may change the terms or cancel a revocable living trust. Upon revocation, the trustor resumes ownership of the trust property.

In general, a revocable living trust is used when the trustor does not want to lose permanent control of the trust property, is unsure of how well the trust will be administered, or is uncertain of the proper duration for the trust.

Trusts come in a variety of forms and can be established in many different situations. Some common forms of Trusts include:

  1. Asset Protection Trust - A type of Trust that is designed to protect a person's assets from claims of future creditors, frequently established in foreign countries.
  2. Charitable Trust - A Trust - and there are many different types of charitable Trusts - established to benefit a particular charity or the public. Typically charitable Trusts are established as part of an estate plan to lower or avoid imposition of Federal (and some states') estate and gift taxes.
  3. Constructive Trust - An implied Trust establish by operation of law. While a person may take legal title to property, equitable considerations require that the equitable title of such property remain with others. Typically fraud is a requirement for the establishment of a constructive Trust, the person who took legal title to the property did so as a result of a fraud brought upon the prior legal title holder.
  4. Express Trusts - are those specifically created by the grantor under a Trust agreement or declaration of Trust.
  5. Implied Trusts - arise from particular facts and circumstances in which courts determine that although there was not any formal declaration of a Trust, there was an intention on the part of the property owner that the property be used for a particular purpose or go to a particular person. For example, if a neighbor asks you to take care of her car for her when she is on vacation, and never returns, there was an implied Trust, as she was not making you a gift of the car.
  6. Inter Vivos Trust - A Trust that is created during the lifetime of the grantor. A common type is a revocable "living" Trust in which the grantor transfers title to property to a Trust, serves as the initial Trustee, and has the ability to remove the property from the Trust during his/her lifetime.
  7. Irrevocable Trust - A Trust that cannot be altered, changed, modified or revoked after its creation (absent extreme extenuating circumstances). Once a grantor transfers property to an irrevocable Trust, the grantor can no longer take the property back from the Trust.
  8. "Living" Trust - A Trust created during the lifetime of a grantor which can be altered, changed, modified or revoked. Typically the grantor is the initial Trustee as well as the initial beneficiary of the Trust, with his/her spouse and children as the ultimate beneficiaries of the Trust.
  9. Resulting Trust - A Trust that arises from, or is created by operation of law, when the legal title to property is transferred, but the beneficial interest is to be enjoyed by someone other than the person who got the legal title.
  10. Special Needs Trust - A Trust that is established for a person who receives government benefits so as not to disqualify the beneficiary from such government benefits. Ordinarily when a person is receiving government benefits, an inheritance or receipt of a gift could reduce or eliminate the person's eligibility for such benefits. By establishing a Trust which provides for luxuries or other benefits which otherwise could not be obtained by the beneficiary, the beneficiary can obtain the benefits from the Trust without defeating his/her eligibility for government benefits. Often a Special Needs Trust includes a trigger which terminates the Trust in the event that it could be used to make the beneficiary ineligible for government benefits.
  11. Spendthrift Trust - A Trust that is established for a beneficiary which does not allow the beneficiary to sell or pledge away his or her interests in the Trust. A spendthrift Trust is beyond the reach of the beneficiaries creditors, until such time as the Trust property is distributed out of the Trust and placed in the hands of the beneficiary.
  12. Tax By-Pass Trust - A type of Trust that is created to allow one spouse to leave money to the other, while limiting the amount of Federal Estate tax bite that would be payable on the death of the second spouse.
  13. Testamentary Trust - A Trust that is included under the terms and conditions established in a Will. Such Trusts take effect after the death of the person making the Will.
  14. Totten Trust - A Trust that is created during the lifetime of the grantor by depositing money into an account at a financial institution in his or her name as the Trustee for another. This is a type of revocable Trust in which the gift is not completed until the grantor's death, or an unequivocal act reflecting the gift during the grantor's lifetime.

Many Trusts themselves establish "sub-Trusts". For example, a revocable "living" Trust might establish spendthrift Trust and a tax by-pass Trusts upon the death of the first. Trusts can be structured to handle a variety of situations but careful drafting is essential to make the plan work

11What are some of the ways a trust can be an effective estate planning instrument?

A Trust, if properly drawn and "funded", can be extremely helpful in many situations such as:

  1. to avoid a conservatorship. If property is held in a Trust, a successor Trustee can step in and take over management, without the delay and expense of going to court to appoint a "conservator" to manage the property, if the Trust Creator becomes disabled.
  2. to avoid probate. A properly drawn Trust is a separate entity that does not die when the creator dies. The successor Trustee can take over management of the Trust estate and pay bills and taxes, and promptly distribute the Trust assets to the beneficiaries, without court supervision, if the Trust agreement gives the Trustee that power.
  3. (3) maintaining privacy. Trusts, unlike Wills, are generally private documents. Your neighbors and the public would be able to see and how much you had and who your beneficiaries were under a Will, but usually not with a Trust.(4) help keep certain property separate from other property. For example, if you want your daughter to get your vacation home, and your son to get your house in the suburbs, if you create a separate Trust for each property there would be no question of commingling or who gets what.In many estate plans, the Trust is the central tool that is used to control and manage property. A Trust continues despite the incapacity or death of the grantor. It determines how a Trustee is to act with respect to the Trust estate. It determines how property is to be distributed after the death of the grantor. A Trust is thus one of the major estate planning tools used for a grantor's property so that court interference in the event of incapacity or death can be dramatically reduced (if not completely eliminated).Trust definitions provided by http://law.freeadvice.com/estate_planning/trusts/estate_planning.htm
12What type of people should create a trust?
13How much does it cost to create and maintain a trust?

The cost of creating and administering a trust can vary considerably, depending on its type and duration. A lawyer's fees to create a trust, for example, will usually be based on the time involved in consulting with you, and in planning and preparing documents. Therefore, before you hire a lawyer, you should discuss fees (for example, whether hourly or flat fees are charged). Ask for an estimate or arrange a written fee agreement.

A trustee's fee may vary with the skill and expertise the trustee offers. Charges may also be influenced by the size and complexity of the trust estate. This affects the nature and amount of services required, such as record-keeping, asset management and tax planning.

In addition to legal and trustee expenses, there may be accounting, real estate management or other service fees. Other common charges include annual, minimum, withdrawal and termination fees.

Costs are typically based on the complexity of the estate, the nature of the property involved, and to a lesser extent, its value, the amount and nature of the tax planning that is necessary, the amount of time the client will be spending with the lawyer, and the extent of "hand-holding", what the client will do on his or her own, and what the lawyer will do, the other documents involved (powers of attorney, deeds, health care powers), etc.

14When is a good time in ones life to plan and create a trust?

The only time that you can prepare and implement a Trust and an estate plan is while you are alive and have legal ("mental") capacity to enter into a contract. If you should become unable to manage your own affairs or suffer from some other disability which affects your legal capacity, your Trust may be effectively challenged by those who assert that you lacked capacity at the time the documents were created, that you were subjected to fraud, coercion or undue influence during the creation and implementation of your Trust.

The best time to discuss the need for a Trust and its role as part of a comprehensive estate plan with an attorney is now, while you have the capacity to do so.

15How does one go about selecting trustees and successor trustees?

Many grantors and their respective spouses act as the initial Trustees of a revocable living Trust. In this way they remain in control until they are incapacitated or die. Then pre-selected successor Trustees are appointed in accordance with the terms of the declaration of Trust. Usually a spouse, family member or Trusted friend are selected as successor Trustees.

Trustees should be knowledgeable about financial matters, be Trustworthy, know how to manage and invest the Trust estate, care about the beneficiaries of the Trust, and have the financial capacity to reimburse the Trust in the event that they make serious mistakes. If a bank or Trust company is selected to serve as a Trustee of a Trust, it will usually charge a fee for this service, which is then paid from the Trust estate. An attorney can give you specific advice as to who you might name as a Trustee, in light of your own personal and family situation.

16What is "conservatorship" all about, in relation to a trust or probate?

If you suffer from an incurable disease or are involved in a debilitating accident and are unable to manage your own affairs, state law might require someone to go to court to have a conservator appointed by the court. The conservator is given the authority to make financial decisions and handle your financial affairs, under court supervision, when you lack the capacity to manage them on your own.

The conservator has to make periodic reports to the court and petition the court for additional authority under certain circumstances. Typically, the conservator may be paid for services rendered on your behalf and there will be attorney fees as well. In addition, the court will often require your conservator to purchase a "surety bond" which is a type of insurance policy, to protect the conservatorship estate. The costs and expenses of a conservatorship are paid by your estate.

17How can a trust prevent a conservatorship proceeding?

A Trust is used to hold the property, and the Trustees manage the Trust estate. In the event of your incapacity your pre-appointed Successor Trustee(s) will manage the Trust estate in accordance with the instructions that you have provided. Thus, a properly prepared and funded Trust can enable you to avoid a conservatorship proceeding over your estate. Compared with the cost of a conservatorship proceeding, a Trust can be very attractive.

18How could a trust legitimately lower the federal transfer tax liability of an estate?

The use of a trust may help you achieve certain goals, such as reduction of taxes. However, while trusts can offer a number of tax advantages, tax avoidance should not be the sole motivation for using this estate-planning tool.

It also should be recognized that the laws governing trusts and their taxation are complex and subject to change. As an example, under the Tax Reform Act of 1986, income earned in a trust which has a beneficiary under the age of 14 will be taxed at that beneficiary's marginal tax rate. This is a significant departure from prior tax law, which provided that such income be taxed to the child at his or her own tax rate, often resulting in little or no tax being due.

Because of the new tax rules, an individual contemplating a trust for tax purposes should consult with his or her accountant or attorney to determine whether the trust can be structured in a way to meet the tax objectives. By carefully choosing the proper type of investments within a trust, it may still be possible to accomplish tax goals, but careful planning and drafting are required. These facts, coupled with the numerous financial considerations involved in estate planning, suggest that professional legal and financial assistance may be necessary to help you make an informed decision.

Trust tax info provided by http://www.wsba.org/media/publications/pamphlets/trusts.htm
19What protection is created for my family by having a "revocable living trust"?

A revocable "living" trust is a vehicle that is very helpful in avoiding probate. During your lifetime, you can transfer ownership of your assets to the revocable trust so that it is owned by the trust at the time of your death, and thus not subject to probate.

A revocable trust is not a very good asset protection technique - assets that you transfer to the trust will remain available to your creditors. However, it does make it more difficult for creditors to access these assets; before doing so, the creditor must petition a court for a charging order to enable the creditor to get to the assets held in the trust.

In addition, in most instances a revocable trust becomes irrevocable, usually upon the death of the grantor. Once it is irrevocable, a typical "anti-alienation clause" protects the assets held in the trust form being used as collateral by the trust beneficiaries. While the assets are held in the trust, the beneficiaries do not have control over the property, and any distributions are subject to the trustee's discretion. Creditors cannot force a trustee to make a distribution to the trust beneficiaries; thus the assets held in a trust can remain outside the reach of the beneficiaries' creditors (until distributed into the hands of the beneficiary).

Trusts Definitions & descriptions provided by:

http://www.answers.com/topic/resulting-trust#copyright

http://law.freeadvice.com/estate_planning/trusts/estate_planning.htm

http://www.wsba.org/media/publications/pamphlets/trusts.htm