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Why Does a Living Trust Avoid Probate?

Estate Planning

Probate is a legal process where the title or ownership of property is transferred after someone dies and there is no designated beneficiary or survivor.

For example, you have a bank account titled Siri and Alexa Tech (sorry I get really tired of John and Jane Doe). Siri dies. The bank takes out the big black felt pen, scratches Siri's name off the account. Now the account looks like xxxx and Alexa Tech. Alexa can continue on. Now Alexa dies. Now the bank account looks like xxxxxxxxxxxxxxxx. Now we need a probate, for the court to decide who or whom should receive the money in the bank account.

But what happens if Siri and Alexa have a living trust – Siri and Alexa Tech Living Trust. Same example, Siri dies. The bank gets out the big black felt pen, but wait the Siri and Alex Tech Living Trust didn't die, just Siri did. The bank puts away the big black felt pen. Now Alexa dies. Again, out comes the big black felt pen but wait the Siri and Alexa Tech Living Trust didn't die, just Alexa did. Instead of going to probate, the trust document is reviewed and the new trustee is appointed. Once some paperwork is completed with the bank, the new trustee has access to the money in the account.

In my examples I have used a bank account. The process is the same for any other type of financial account or real estate.

The decision to have a living trust is complex, time consuming and expensive. You should review your need for a living trust with your CPA, financial advisor and attorney.