Probate and Trusts
Probate is the legal process that validates your will and oversees the transfer of assets from your estate to your beneficiaries after your death. Trusts are legal instruments used to take the transfer of some types of assets out of the probate process.
Probate takes place in the probate court of the city or county where the legal residence of the deceased was located. Wills must go through probate in order to be legally validated, a process that can take between six and twelve months. Attorney and court costs usually range between 3 and 5 percent, so if the estate is worth $100,000, the probate process costs between $3,000 and $5,000. Not all assets go through probate, and the fewer that do, the better.
Some assets bypass the probate process and go immediately to the beneficiaries. Examples are assets that have named beneficiaries, such as life insurance policies and 401(k) accounts, assets you own jointly with another person, such as a house you own with your spouse, and assets held in a trust. A trust is a legal arrangement allowing for the transfer of property to a trustee who holds it for the benefit of another person, the beneficiary. You can be the trustee of your own trust and maintain total control, or you can indicate one or more trustees to administer your trust.
After you set up a trust, you have to fund it by transferring property from your name to the trust. There are legal fees associated with setting up a trust and your situation may not warrant the expense. If you do decide to set one up, find a reputable lawyer who specializes in estate planning; don't buy a do-it-yourself kit or fall for high-pressure sales techniques from companies pushing trusts.