Avoid Probate with a Trust in New York

Does a trust avoid probate? And what’s so bad about probate that you have to avoid it? If you’re creating an estate plan for your assets in New York, chances are that your estate planning lawyer is encouraging you to get a trust so you can skip the probate process. What about probate makes it so unlikeable?

What Is Probate?

A New York probate court will validate your will when you pass away. This legal process is known to many as “probate.” The process ensures that the deceased individual’s debts are paid using the assets from their estate and that the right agent (called the executor) is appointed to carry out the decedent’s wishes. When complete, the court process helps ensure that anything remaining in the estate is distributed to beneficiaries.

Why Should You Avoid Probate?

While probate serves an essential purpose, it has several drawbacks that make it less than ideal for many families:

• Time-Consuming: Probate can take months to years to complete, depending on the complexity of the estate and whether disputes arise.
• Expensive: Probate court costs can be expensive, and your money may be better spent on a trust’s increased costs.
• Court Supervision: Probate is a public process directed by a court. There are filing requirements and deadlines. If you don’t get it right, you must re-file documents until you do. Part of the process is filing the will, which becomes a part of the public record. This is usually not a big deal, but see below for more information on how a trust preserves privacy.

In a nutshell, a difficult probate process can cost you time and expense during a challenging time when that is the last thing you need, which is why you should consider a trust to avoid probate.

What Is a Trust?

There are three primary parties in trusts: the grantor, trustee, and beneficiary. The grantor creates the trust, which the trustee manages. The beneficiary is the person receiving the assets in the trust. Trusts can hold various assets, including real estate, bank accounts, investments, and personal property.

What Are the Different Types of Trusts?

Trusts come in many forms, each serving specific purposes. Here are some of the most common types of trust your estate planning lawyer might recommend:

• Revocable Living Trust: This type of trust allows the grantor to maintain control over the trust during their lifetime, which allows it to be amended or revoked at any time. This trust is usually used to avoid probate.
• Irrevocable Trust: Unlike revocable trusts, you can’t revoke or amend this trust once you establish it. This type of trust can provide asset protection and potential tax benefits.
• Testamentary Trust: Unlike most trust types, testamentary trusts do not avoid probate since they’re established via the probate process. You create a testamentary trust through a will and it “activates” after your death.
• Charitable Trusts: This specialized type of trust is designed to benefit charitable organizations.
• Supplemental Needs Trusts: This trust protects assets for individuals with disabilities without affecting their eligibility for government benefits.

This list doesn’t include all types of trusts available to you. Your estate planning lawyer can help you assess the right type of trust for your goals and situation.

How Does a Trust Avoid Probate?

Now, it’s time to answer the question you have in your head. How does a trust avoid probate?

A primary advantage of many trusts, particularly revocable living trusts, is their ability to bypass the probate process entirely. When you transfer assets into a trust, the trustee becomes the legal owner, so the assets are no longer in the Grantor’s name. A court does not get involved because they are not in a person’s name. The trustee owns the assets and must adhere to the terms laid out in the trust for their distribution or management.

Trusts allow for the seamless transfer of assets to beneficiaries because, unlike probate, there’s no waiting period, which can drag on for months or years (if it is contested). If the grantor owns property in multiple states, each property requires separate probate proceedings. A trust, however, consolidates ownership, avoiding multi-state probate headaches.

Further Benefits of Trusts

Beyond avoiding probate, trusts offer numerous advantages that can enhance estate planning:

• Privacy: While wills become public records during probate, trusts remain private. Granted, it is never advisable or recommended to disclose many, if any, financial details in a will. However, people can still see specific property or money bequests to beneficiaries. They can also see a percentage of an estate a beneficiary may receive (but the amount should not be disclosed). The trust is not disclosed, so there is nothing for the public to see.
• Flexibility and Control: Trusts allow a grantor to set specific conditions for asset distribution after passing away, allowing control of how assets are distributed to beneficiaries.
• Asset Protection: Certain types, like irrevocable trusts, can shield assets from creditors, lawsuits, and divorce settlements.
• Care for Minor or Incapacitated Beneficiaries: Trusts can manage and protect assets for minor children or incapacitated individuals until they are capable of managing the assets themselves.

Does a trust avoid probate? Yes, it can, but that’s not all it can do. Trusts can add another layer of protection and assurance to your estate plan, so you can rest assured that your loved ones are protected.

How Can You Establish a Trust to Avoid Probate?

Creating a trust requires careful planning and the assistance of an experienced estate planning lawyer. Here’s a general overview of the process:

1. Define Goals: Determine what you want to achieve with the trust, such as avoiding probate, protecting assets, or providing for specific beneficiaries.
2. Choose the Type of Trust: Select the trust type that best suits your needs.
3. Draft the Trust Document: Work with an attorney to outline the trust’s terms, including beneficiaries, trustees, and conditions for asset distribution.
4. Fund the Trust: Transfer ownership of assets into the trust. This step is crucial; assets not placed in the trust may still go through probate.
5. Review and Update Regularly: Periodically review the trust to ensure it aligns with your current wishes and legal changes.

Hiring the right estate planning attorney is the first and most crucial step. Without their guidance, you can create costly and, sometimes, irreparable mistakes.

Protect Your Assets From New York Probate

Does a trust avoid probate? Short answer: yes, they can avoid probate, and most types do — except testamentary trusts, as described above. When you transfer ownership of assets into a trust, you also ensure your assets are protected for your beneficiaries following the terms you want.

If your estate plan lacks proper safeguards, our New York estate planning lawyers are here to help you build a comprehensive estate plan that puts your goals first. Contact the Chamberlain Law Firm today through our website or at (201) 273-9763 to discuss your estate plan. For more education, check out our other insight articles.