Answers on Whether or Not You Need a Will or a Living Trust

In this article, I’m going to answer a question that I get a lot as an attorney and that is, “What’s the difference between a Will and a Living Trust?”

What’s a Will?

Let’s begin with the Will. A Will is a testamentary document that goes into effect when you pass away. The administration of a Will is overseen by the courts. Specifically, in Virginia, the bulk of the administration is going to be overseen by an office called the Commissioner of Accounts.

This means that you’re going to have to report to the Commissioner of Accounts every dollar that goes into and out of the estate before you can get the approval to wrap up the estate.

This means that when you’re sending someone to probate, you’re sending them to the court to qualify as a fiduciary, and they’re getting the court’s permission to act on the estate. Once they get the authority to act on the estate, then that fiduciary is going out and marshalling the assets, accounting for the assets to the commissioner of accounts, and then distributing the assets.

Sometimes, it’s a really good thing to have a judge help you resolve any disputes. One of the biggest benefits of our justice system is having a judge available to help you with those kinds of things. But the thing to know about probate is that it’s optional. You don’t have to go through probate if you do proper planning.

The Benefits of Avoiding Probate

And so, why would we want to avoid probate? Well, for one thing, it’s always stressful to go to court and ask them for anything. You can save your loved ones the heartache of having to go to court.

Additionally, it’s public record. So, everything that you own when you pass away gets disclosed to the public via the Commissioner of Accounts. And so then that means that creditors, and potential creditors out there, might have an idea of whether your kids will inherit a large amount of money. This may make them more likely to sue your kids.

The final drawback is that it’s expensive. Probate costs include not only the court costs but also the lawyer costs. So for an estate that is five hundred to a million dollars, you’re looking at about fifteen hundred to two thousand dollars of court cost. And that’s before you even hire a lawyer.

Also, if people start fighting about things, if there are any disputes that arise, well, the cost of probate can obviously skyrocket.

What is a Living Trust?

And so a Living Trust is a contract between yourself as an individual and yourself as trustee to hold everything you own in trust during your lifetime; amenable, revocable by you, and then it becomes irrevocable when you pass away. So a living trust passes things by operation of law because it’s a contract.

The other benefit of the living trust is that it provides a lot of protection. It becomes irrevocable. It gets artificial personhood when you pass away.

There are a lot of features and benefits that you get when you do planning with the Living Trust. t delivers a lot of value in saving you costs and fees and the heartache and the time and difficulty of going to court.

How To Avoid Probate

If you turn your estate into a non-probate estate, then you don’t have to go to probate. How do you accomplish that?

You can accomplish probate avoidance by titling your assets in such a way that they pass by operation of law. This means having joint tenancy on bank accounts and real estate or contracts with your institutions in the case of beneficiary designations, Pay-on-Death designations, Transfer-on-Death designations or in the case of real estate, turning it into a non-probate asset by titling it in a living trust.

Now, in the case of real estate, it’s critically important to get your assets into the Trust during your lifetime so that it avoids probate.

Additionally, if you have real estate in another state, it’s critically important that you avoid probate. This is important because if you have real estate in another state, then it’s going to open up another probate, what’s called an ancillary probate, in that jurisdiction. That would mean you just doubled the cost of your probate.

For example, let’s say, you own a Real Estate in Virginia and have another piece of property in Florida or Maine or California or anywhere, then it’s crucial that you do a little bit of estate planning with the Living Trust. Doing so avoids probate in both jurisdictions, and saves your loved ones the court costs and attorney fees of two probates.

So, in sum, probate is optional. If you want to create a Will, then you know what you’re getting into. If you create a Living Trust, you know what you’re saving your loved ones.

If you want to learn more about living trusts or avoiding probate, make sure that you book a consultation with Misha Gill today. You can make a consultation appointment today through his office number (703) 553-2577 or directly through his email [email protected].