Previously posted in 2015.
By Christine Steinmetz, J.D., Hotline Attorney
This post is part of a series regarding wills and trusts. In our previous posts, we discussed that a will always goes through probate. We also began talking about how a trust avoids probate.
As we discussed previously, probate administration is the court process to distribute property owned by an individual at their death. If an individual does not own any property at death, then there is no probate.
A revocable grantor trust avoids probate because the assets are transferred into the name of the trust, and you avoid owning any property in your name alone at death, and consequently avoid the need for probate administration. The terms of the trust can provide directions to the successor trustee on how to distribute the trust property after the grantor’s death. In this way, the trust acts much like a will, except that no probate court involvement is necessary.
Many clients call the hotline asking whether a living trust will save them money. A living trust will never save money for the person who creates it, due to the cost for the preparation of the trust document and the associated documents required to fund the trust. In addition, if real estate is sold from the trust, before or after the death of the grantor, a certificate of trust existence and authority stating that the trustee is allowed to the sell the property will typically be required. There are also additional costs associated with possible amendments to the trust in the future. The successor trustee will most likely need legal counsel to help him or her in complying with the requirements of the trust and paying any applicable death taxes. Although the living trust may not save you as the creator of the trust money, it will save money for your beneficiaries.
Another question clients frequently ask is whether they would still need a will if they have a living trust. Many people are surprised to find out that even though they have a trust, there is normally a will, called a pour-over will. A pour-over will transfers any property solely owned in the name of the creator of the trust at the time of death. The pour-over will “pours” the probate estate over into the name of the trust. Although the grantor may have transferred all of his or assets to the trust to avoid probate, a pour-over will is needed to act as a safety net, catching any property not transferred into the name of the trust during the creator’s lifetime.
In our next post, we will continue our discussion regarding living trusts and other alternatives. If you have questions regarding wills or trusts, please contact the Legal Hotline for Michigan Seniors at 800.347.5297 and our hotline attorneys will be happy to answer your questions.