For most people, one of the biggest reasons to have a trust is to avoid probate. For those who don’t know what probate is, probate is when the government oversees the administration of a deceased person’s (or decedent’s) estate. Probate is time-consuming, expensive, and often tedious (unless the family is fighting, in which case bystanders can grab popcorn as they watch the drama unfold). Probate is also required if the estate is worth enough – as of 2021, the threshold is about $166,000.
Assets owned by the trust are not considered part of the estate (at least not for the purposes of probate), so if all the high-value assets are in a trust, then probate is avoided. However, sometimes things don’t go according to plan, and the Probate Court still has to get involved. Here are a few reasons why this might happen:
- A high value asset was not put into the trust. Sometimes an asset is overlooked, or the asset is pulled out of the trust and not put back in. The most common example is a house being taken out of the trust for a refinance and the homeowners forgetting to put it back in afterward. In California, this can be fixed by asking the Probate Court to confirm that the house was meant to be a trust asset – it’s still time-consuming and somewhat expensive, but it’s much easier and cheaper than a full probate.
- The trust was poorly drafted. Sometimes there’s some trust language that’s so poorly worded even lawyers can’t make heads or tails of it. It could also be the case that the trust doesn’t accurately reflect the decedent’s wishes. When this happens, the best thing to do is ask the Probate Court to weigh in, and either interpret the unclear passage or amend the trust to line up with what the decedent wanted. This process will likely take more time and money than putting an asset into the trust, but it’s still better than a full-scale probate proceeding.
- The beneficiaries are causing problems. This issue is a rather broad category since there are many things a beneficiary could do to involve the Probate Court. For example, they may question the trustee’s accounting of trust funds to the point where the trustee decides to ask the court to approve the accounting just to shut them up. Or the beneficiaries could choose to go to the Probate Court themselves, for any number of reasons, and the trustee has to respond. When the beneficiaries get involved in Probate Court proceedings, it’s best to assume a full-scale lawsuit will result, and the time and cost savings of a trust are gone.
But don’t lose heart – these issues can all be avoided with proper planning. A licensed, experienced attorney can make sure the trust is clear and accurately reflects what the client wants. The client can make certain all their high-value assets are in the trust, and they can check every few years to make sure those assets are still in the trust, that any new assets have been added to the trust, and that the trust still reflects their wishes. Problem-causing beneficiaries are a more difficult problem to tackle (unless the client is good at football), but the client can take steps, so they’re less likely to cause serious problems.
If you would like to learn more about this topic, or if you would like me to review your plan to make sure the Probate Court won’t have to get involved, please email me at email@example.com.