Estate Planning Basics: Trust Assets and Probate Assets
Estate planning isn’t just for the wealthy. It’s an important element of protecting the people you love and the legacy you want to leave behind. An estate is made up of assets.
Assets can be any form of cash, physical property or intangible benefits. These include:
• A house
• other real estate
• business interests
• stocks, bonds, and mutual funds
• money-market accounts
• brokerage accounts
• royalty contracts, patents, and copyrights
• jewelry and antiques
• precious metals
• works of art
• valuable collections
For estate-planning purposes, assets fall into two main categories: trust assets and probate assets. Assets held within a trust [link to post on trusts] are referred to as trust assets. Assets that are not within the trust are called probate assets. I’d like to outline the two, and show why creating trust assets is preferable in estate planning.
Trust assets
The advantage of putting assets into a trust include reduced estate taxes and greater control in how your descendants will receive their inheritance. When you put your assets into a trust, you no longer own the assets legally, which become known as trust assets.
You can decide what you’d like to be put into a trust, to become a trust asset, and you do this by having the item or property or deed officially given to the trust, with a title in the form of a deed or other legal documentation. For example, a certificate of title for a car owned by a trust should show John Doe, Trustee, or something similar indicates that it’s the trust that owns the asset, and not John Doe himself. There are various ways to transfer property such as jewelry, art, coins and other collectables, and an estate planning attorney can assist with this.
Probate assets
All assets that are not included in the trust are probate assets. A court proceeding is necessary to determine how these probate assets can be distributed. Thus, it makes sense to consider assigning assets to a trust, to avoid having your heirs go through probate court to receive any legacies you have assigned them.
The actual act of transferring assets to a trust can be a bit complicated and challenging, even for an attorney who has some experience with this process. But it’s worth the time to work with an experienced estate attorney to set up a trust for assets so that your estate can run smoothly.
Get help from someone who is skilled in estate planning and probate. It’s critical that you have legal documentation that the trust owns the assets. Without such documentation, these assets cannot be distributed as part of the trust and, as I mentioned, they’re considered probate assets.
The consequences of a poorly planned estate can affect not only the peace of mind of your survivors, but can be detrimental to the value and distribution of the assets you leave behind.
Find an experienced attorney who is familiar with probate law and asset protection in your state to protect your family and protect your legacy. [link to service line questionnaire]
8 Comments
Andy Harrison
January 19, 2016at 2:26 pmGreat explanation you did! In regards to probate assets, are their certain assets that wouldn’t qualify to go into the trust? I would assume that some things you can’t put into a trust of can you really put anything there? The two have always confused me.
Paul Deloughery
March 24, 2016at 8:49 amIf you are confused, it only means that you are thinking. That’s a good thing. You should talk to an estate planning attorney to get a detailed answer. Generally, you put everything in the trust. But you have to be careful about qualified benefits (such as IRAs). Also, motor vehicles are often not put in the trust. This is a judgment call that takes more than guesswork. And … make sure that the assets you believe you are putting in the trust don’t have some other beneficiary designation. For example, if you transfer a house that is in joint tenancy with right of survivorship into the trust, the house (most likely) still remains in joint tenancy and will (officially) go to the remaining owner upon the one owner’s death. Title companies don’t always catch this, and most attorneys don’t know about this. But it could pose a problem. Let’s say, for instance, that your dad is married to a second wife. They own their house in joint tenancy. Then they put the house in a trust that says the survivor gets to use the house during his/her lifetime and then it gets sold and divided among both of their kids. Legally, if they did not sever the joint tenancy before transferring the house to the trust, if your dad dies first, the second wife gets the house free and clear of the trust. Will most attorneys realize this? No. But the second wife might hire a smart attorney and tell her about this. Anyway, this is just one example of how technical and complicated this issue can be. See a good estate planning attorney. (Call us here is you want a free consultation: 602-443-4888.)
Andre Beluchi
June 14, 2016at 11:58 amWow, so there is an advantage in the trust assets. Reading about them reminded me of my grandfather’s situation. He talked to me about updating his estate planning documents and changing a couple of things.
Luke Smith
June 15, 2016at 8:02 pmMy friend’s grandfather just passed and in his will, he left some of his stuff to his family. They were later told that the rest would go through a probate. My friend asked me what that was and I didn’t know. I didn’t know that it is a process where the other stuff is left to the courts to place. I think it’s worth working with a lawyer to help you get stuff that might be going through probate.
Simon Brooks
July 7, 2016at 7:00 pmWow, I had no idea that anything that isn’t specifically accounted for in the will ends up going into probate courts for the beneficiaries to work out. I imagine that hiring an attorney with experience in both probate and estate planning could really help to keep that from happening. After all, one of the main purposes of creating a will is to relieve the stress on your family of divvying up your estate and property ending up in probate court just seems like it would be counter-intuitive.
Paul Deloughery
July 13, 2016at 9:12 amA will does not prevent probate. However, it helps clarify the deceased person’s wishes and thereby helps avoid conflict (and litigation). Without a trust, the deceased person’s property will probably have to be administered by having the court appoint a Personal Representative. Paul
Derek Mcdoogle
October 25, 2016at 4:34 pmYou mentioned that the advantage of putting assets into a trust include reduced estate taxes and greater control in how your descendants will receive their inheritance. My best friend’s father was recently diagnosed with a terminal disease and is trying to get all of his things together. Do most estate planning attorneys have a preference for how often these plans are updated? Hiring an estate planning attorney could be very beneficial.
Paul Deloughery
December 17, 2016at 9:15 amIt probably makes sense to have the estate plan reviewed.