Nevada Estate Planning & Elder Law Information Blog

What Is a Living Trust

If you have been reading this blog for a while, you have heard me refer to a Living Trust as an instruction manual.  In fact this explanation might be selling a Living Trust short.  A Trust does carry with it instructions for caring for you, your assets, and your debts, but more than just "instructions", a Living Trust is an entity in which you place all of your assets so that they can be stored together. 

Because the trust now becomes the owner of all of the assets, your can elect to control the trust yourself, or you can elect to give someone else control of the trust.  This can be a real benefit should you become incapacitated and unable to handle your own affairs.  This can also be useful in the case of a spouse who is unfamiliar or uncomfortable handling the family finances.  A trustee can be designated to assist that spouse, without them having to give up any of the benefits of the assets.

Best of all, because legally, you no longer "own" your assets (the trust owns the assets), your estate does not have to go through probate when you pass away, which saves your beneficiaries, both time and money. 

In the meantime, assuming you elect to act as the trustee of your own trust, you maintain full control. As a trustee, you can do everything you did before.  Buy and sell assets, change beneficiaries, and (in the case of a revocable living trust) even revoke or end your trust.   For more information on Living Trusts check out this free information available from the State Bar of California.

What is Probate?

Probate is a court process which occurs when you die to insure that all of your debts are paid, and any assets you leave behind are distributed.  If you have a will, the court will review the document, and give the public the opportunity to contest whether the will is legally valid.  Assuming that your will is valid, the court will then supervise the executor of the will, who is charged with the responsibility of carrying out your wishes for the distribution of your assets.  If no legal will exists, then the property is distributed in accordance with state law.

The concern, that I , as well as other attorneys, have about the probate process, is primarily the time and expense involved.  The executor of your will is entitled to fees for that service.  If you have nominated a family member or friend as the executor, that person may be willing to waive any fees for their services, however it is likely they will need to retain a lawyer to assist them through this legal process.  Additionally, there may be fees charged by the court, and if any assets have to be valued, it may be necessary to obtain a real estate or other type of property appraisal.

If for some reason, the person you nominated as your executor is unable to serve in that capacity, the court may hired someone on your behalf.  A court appointed executor will definitely charge for their time.  An additional concern comes up if you have property located in different states, such as a primary residence here in Nevada, but a cabin or vacation home in Utah or Arizona.  The property located in each state will be distributed in accordance which each states laws.  This means that in some circumstances, it could require multiple probates for the various states involved.  Your executor might have to incur travel expense, or other costs to complete this process -- all of which must be paid first before your assets can be fully distributed.

The probate process can also take a lot of time -- any where from a few months to a few years depending upon the complexity of the estate.  During at least a part of the time that the probate is pending, it is common to have the assets "frozen" so an inventory can be taken, values can be established, and if necessary, taxes calculated and paid.  Assets cannot be distributed or sold without court and executor approval.  In the meantime, your family or heirs may need money to live on.  They can request a living allowance, however this type of request is discretionary with the court and is not automatic.  Your family incurs more cost for the request, and more time is taken to evaluate the claim.

For more information on Probate, see this free public information brochure available from the State Bar of Nevada.