There are a lot of good reasons to set up a trust as part of your estate plan: providing for a special needs child, more control and flexibility in distributing your assets upon your death, greater control over incapacity planning, and estate tax avoidance.
But there is another great reason to create a trust: to avoid probate court.
In Idaho, if you own a home or if all your stuff is worth over $100,000.00, your family or heirs are required to go through probate court to divide up your property. This requires filing a petition with the court and requesting someone to be appointed a “Personal Representative” to pay bills, change title to property, liquidate assets, and ultimately distribute the estate assets to devisees.
In many cases, this is not that big of a deal if you have an uncontested estate. Idaho has an optional informal procedure that, while time consuming, is somewhat painless.
So why would you want to avoid probate court then? Here are the top three reasons:
- Privacy
Probate court is a public proceeding. In other words, everything that happens in probate court is accessible to the public-at-large. Any documents filed with the court, including your will, are placed in the court’s filing system and are available to all citizens to view and copy.
Your will may contain sensitive and personal financial information that you’d rather keep private. Or maybe you’d rather just keep your business your business, and for no other reason. Perhaps the way you divide your property will cause family disharmony, or even worse a legal challenge, if that information is publicly known.
Because a properly drafted trust avoids probate court, none of your personal and private information is available to the public, which can be of great worth.
- Cost
The legal costs of having to go to probate court can be daunting in some cases. If someone decides to legally challenge the validity of your will, or challenge the way in which you distributed your assets, the probate court process will be very expensive. Lawyers will need to be hired and will bill hourly for their time. And like most court battles, this can take a long time. Many times keeping your estate out of the court system in the first place with a trust can avoid these issues.
However, most people hire a lawyer even in an uncontested informal probate proceeding. There are many documents to be filed and procedures to be followed even with this simplified process. And of course, this will require the payment of attorney fees. Granted, paying an attorney to draft a trust is more expensive than drafting a will, but in many cases it will be far more inexpensive in the long run to go through probate even with an informal proceeding.
Finally, the cost of probate can escalate very quickly if you own real estate in more than one state. Not only will you have to commence a probate proceeding in your residential state, but you will also have to file an ancillary proceeding in every other state where real estate is located. In most cases, this means hiring an additional lawyer licensed in that state, and paying more attorneys fees and further court costs.
- Efficiency
A probate action takes time, and usually moves slower than most people desire. It often takes one to two weeks after filing a probate petition for the judge to appoint a personal representative with the power to take care of the estate. This of course, is after you meet with an attorney and she drafts your court documents. Thus, it could take a month or longer after you die for someone to come in and take legal control of your assets.
You may have assets that can’t linger that long without attention – you need someone to take control as soon as possible after your demise. For example, if you own rental property or a business, waiting for a personal representative to have legal access to these assets may be undesirable, and may be costly.
Again, a well drafted trust allows your trustee immediate access to your assets, and when time is of the essence, this can be a good reason to have a trust.