I often hear people say that their estate won’t have to be probated…because they have a trust. Just having a trust in place, does not necessarily mean the personal representative (PR) of your estate will not have to probate your estate.
This is a fear of many as in some states probate can be more expensive and onerous than in others. In Montana, where we practice, probating an estate is not so scary. We have relatively easy access to the courts and legal fees are reasonable, should you use a law firm to manage the probate.
However, just because you have a trust in place, whether it be a living revocable trust or a testamentary trust, does not mean your PR will not have to open a probate to distribute assets. Any assets that require steps to legally transfer ownership must be “put in the trust” or addressed in other ways to ensure legal transfer outside of probate. Such assets include bank accounts, real estate and business assets. These assets must be put in the name of the trust, or “owned by the trust” to avoid probate. Most states provide for beneficiary designation as well that would allow for transfer outside of probate.
We recently managed the probate of an estate in Montana just to transfer a share in real estate. The estate was that of an attorney in California who practiced in the area of estate planning. They created a living revocable trust for their own estate. All of the assets in the estate were named in the trust, except the settlor’s interest in a small fishing getaway in Montana. A probate was necessary in Montana to allow the PR to transfer the attorney’s ownership share in the property to the trust. Just because you have a trust in place, does not mean probate will not be necessary for your estate.
Additionally, if no assets are put in the trust, the trust has no effect. This is what we mean by “funding the trust”. In order to effectuate the wishes you have articulated in your trust, you must provide funds to realize them. There must be assets available to the trustee to distribute. When planning your estate and its distribution after you are gone, make sure that you have planned for the assets you wish to be distributed. Any thoughtful and thorough estate planning lawyer can guide you through this process.