Probate

What is Probate and how can it be avoided?

Probate is the process of presenting your Will to the Probate Court after your death, and having the Will allowed, ultimately passing title to your property to your intended beneficiaries.  In Massachusetts, the probate process takes at least 1 year.  Only property in your individual name goes through your Will (and therefore the probate process).  Property owned jointly or naming a beneficiary (i.e. life insurance, IRA's) pass directly to the joint owner or named beneficiary and do NOT pass via your Will or the probate process.

 

Some of the disadvantages of going through Probate are the costs (lawyer's fees and probate costs), the delay (1+ year process, delaying passing the assets to your intended heirs), and privacy (probate is a public process, and anyone can look at the filings). 

 

You can avoid probate by setting up a Revocable Trust and "funding" this trust during your lifetime (re-titling your assets into the name of this trust - you lose no control by doing so).   Property held in the Trust is not part of your probate estate and passes as set forth in the Trust.  During your lifetime, you would be the Trustee and beneficiary of this Trust - you do not lose any control over the property.  Then the Trust provides for a successor Trustee and provisions for distribution upon your death.

 

In addition to avoidance of probate, funding the trust also provides you with the following benefits:

 

1.  Management:  In the event that you become incapacitated, there would be no need to appoint a conservator or guardian with respect to the property already owned by the trust - your successor trustee would continue to manage the trust property for your benefit during your lifetime;

 

2.  Privacy:  When property passes at death via the trust (as opposed to your Will), it is private.  No one will know who your beneficiaries are or how much money you had.  Your Will and related probate documents, on the other hand, are public documents on file with the Probate Court, available for anyone to obtain.

 

3.  Probate in other states:  In addition to avoiding probate in Massachusetts (your state of residence), you also avoid "ancillary probate" (probate in any other state where you own real estate).

 

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Avoiding probate and reducing estate taxes are two different matters.  The current cutoff point for estate taxes if $5.49 million for federal estate taxes, but only $1 million for MA estate taxes.  (See Estate Taxes for more information on estate taxes.)

 

Also, although the Trust avoids probate, it does not shelter assets from the rights of a spouse or from the claims of creditors.  In addition, if does not protect your assets from Medicaid or nursing home costs.

 

Will:  You would still need to have a Will in addition to the Trust - the Will would pass everything into your Trust at your death (any assets not already transferred into the Trust during your lifetime).

 

Income Taxes:  You would still be treated as the "owner" of the property in your Trust - all income would still be reported on your individual income tax return.

 

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"Funding" Your Trust: 

 

In order for the Trust to achieve probate avoidance, you need to re-title your assets into the name of the Trust.

 

1.  Liquid Assets:  To transfer liquid assets into these trusts, you can go through your broker or financial planner, or obtain the necessary forms from the institution to change the title on the accounts, stocks, etc. to the names of your trust.

 

2.  Real Estate:  To transfer your real estate into your trust, a new deed is prepared and recorded at the Registry of Deeds, along with a simple 1-page Trustee Certificate (so that the entire Trust does NOT have to be recorded at the Registry of Deeds).


**The new MA Homestead law now allows the creditor protection of the Homestead (up to $500,000) for property owned in a Trust; so you can now re-title your home into a Trust to avoid probate, WITHOUT losing out on the benefit from the Homestead.