What is a Will?
A will is a legal declaration by which a person, the testator, names one or more persons to manage his estate and provides for the transfer of his property at death. A will may also create a testamentary trust that is effective only after the death of the testator.
What is a Trust (Living Trust)?
In the United States, a living trust refers to a trust that may be revocable by the trust creator or settlor (known by the IRS as the Grantor). Living trusts are often used because they may allow assets to be passed to heirs without going through the process of probate. Avoiding probate will normally save substantial costs (the probate courts, in some states, charge a fee based on a percentage net worth of the deceased), time, and maintain privacy (the probate records are available to the public, while distribution through a trust is private). A living trust can also be utilized to plan for unforeseen circumstances such as incapacity or disability, by giving discretionary powers to the trustee.
What is an Irrevocable Trust?
In contrast to a revocable trust, an irrevocable trust is one in which the terms of the trust cannot be amended or revised until the terms or purposes of the trust have been completed. Although in rare cases, a court may change the terms of the trust due to unexpected changes in circumstances that make the trust uneconomical or unwieldy to administer, under normal circumstances an irrevocable trust cannot be changed by the trustee or the beneficiaries of the trust.
What is Probate?
Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person’s property under a valid will. A probate court decides the validity of a testator’s will. A probate proceeding interprets the instructions of the deceased, appoints the personal representative of the estate, and adjudicates the interests of heirs and other parties who may have claims against the estate.
How do I Avoid Probate?
Probate generally lasts several months, occasionally over a year before all the property is distributed, and may incur substantial court and attorney costs. One of the many ways to avoid probate is to execute a revocable living trust. A settlor, or a creator of a trust, transfers ownership of his real property from himself to a trust which he controls and can revise (except in the case of an irrevocable trust.) Upon death, the persons named as beneficiaries in the trust acquire ownership of the property of the trust. Probate is a public process while a revocable living trust shields private affairs of the deceased and the heirs from public scrutiny.