13 Apr How Setting Up a Trust Helps You Avoid Probate
You’ve worked hard and invested wisely to build your wealth. And when the time comes, you’ll be passing that wealth down to your heirs. Naturally, you want to leave the largest legacy possible. But unless you plan ahead, probate fees could consume up to 7% of your estate.
That 7% adds up to tens or even hundreds of thousands of dollars that never reach your family. Like estate taxes, probate fees are worth avoiding.
Setting up a trust is one of the most practical things you can do for the people you love. Because the assets in a trust are not subject to probate, you can use a trust to preserve more of your wealth for your beneficiaries.
How a Trust Avoids Probate
Probate is the legal process of verifying someone’s will and distributing their assets after they pass away. Until the probate process is complete, their beneficiaries cannot inherit. But it takes time (years in some cases) and it costs a lot of money.
A trust, however, does not have to go through the probate process. A trust is a separate legal entity, and when you fund a trust, you’re basically transferring ownership from your own name to the trust itself. With a trust there’s no court involvement, no public records, and no waiting period.
Who Needs a Trust?
Many people assume that trust funds are only for the wealthy or for complicated family situations. In reality, a trust makes sense for all different kinds of people.
You can benefit from setting up a trust if:
- You own any real estate, including your primary home
- You have minor children or dependents with special needs
- You own assets in multiple states
- You want to keep your financial affairs private after death
- You want to leave your assets to an unmarried partner, your stepchildren, or someone who is not a close relative
- You want more control over who inherits and when
Why a Will Isn’t Enough
A lot of people think a will is all they need. And in some situations, that’s true. However, all wills have to go through probate. This makes them a matter of public record and opens them up to legal challenges.
A trust, on the other hand, is a private legal entity. It does not have to go through a court process. And because the instructions for distribution are built into the trust itself, there is far less room for challenges to arise.
How a Living Trust Works
Step 1: Deciding on the terms
A trust gives you more say over who inherits and when. Although the trust technically owns the assets, you keep full control during your lifetime. You can add or remove assets or change the beneficiaries at any time. And you can set conditions for inheritance or spread distributions out over several years instead of distributing the entire sum at once.
Step 2: Drafting the documents
Once you’ve decided on the terms of your trust, it’s time to meet with an estate planning attorney. They will draw up the documents that establish the trust as a legal entity. During your lifetime, you will be the trust administrator, but you’ll also need to name a successor trustee.
Step 3: Funding the trust
This is where most people tend to make mistakes. Setting up a trust doesn’t mean a thing if it isn’t properly funded. You have to take the time to transfer ownership of your assets over to the trust. If those assets are still in your name when you die, they will have to go through probate.
Step 4: Administering the trust
After you pass away, the person you named as successor trustee takes over and manages the assets or distributes them according to your instructions. This is called trust administration, and it can take some financial expertise. Professional trust administration services exist specifically to help successor trustees navigate that process without making costly mistakes.
Get Estate Planning Advice You Can Trust
If you haven’t started the estate planning process yet, you aren’t the only one. A lot of people think it’s something that can wait. But the truth is that none of us knows when our time will come. Waiting around only leaves your family with fewer options and costs them a lot of money.
At Phelps LaClair, estate planning is all we do, and we’ve been in practice for over 40 years. If you want advice from an expert, we can answer all of your questions. We’ll help you draw up a sound plan that is legally valid, protects your assets, and avoids probate when the time comes.
With nine locations across the Phoenix Valley, we’re sure to have an office near you. Whether you’re starting from scratch or updating an existing plan, contact us to schedule a consultation today.
Photo by Scott Graham on Unsplash with permission under the Creative Commons license for commercial use 3/28/26.