Upon a person’s death, assets held in the individual name of that person (e.g. his or her bank account, investment account, real estate) will be unavailable to family or anyone else until a Personal Representative (also known as an Executor) is appointed by a local probate court to administer the decedent’s estate. As part of this probate court proceeding, the court will either approve the will of the decedent as being the most-recently signed will and that it was properly signed without any duress or undue influence, or the court will certify that the decedent died without a will, in which case state law prescribes how certain family members will share the estate.
The above-described “probate process” causes some expense and delay. In Massachusetts, the probate process is not onerous—usually a thousand dollars in filing fees and attorney’s fees, and a few weeks of delay—so some clients do not bother avoiding probate.
Certain assets are an exception to the general rule that a probate proceeding is required to obtain control over a decedent’s assets, because these assets do not pass at death in accordance with a will:
Assets owned as joint tenants with right of survivorship or “tenants by the entirety”
Assets that comes with the feature of a beneficiary designation such as:
Life insurance benefits
Retirement plan and IRA benefits
Bank accounts with a payable-on-death (POD) feature
Investment accounts with a transfer-on-death (TOD) feature
Any asset titled in the name of the decedent’s revocable trust
A person determined to avoid the delay and expense of a probate process at his or her death can make use of joint ownership with right of survivorship and beneficiary designation forms. And, for assets that will not be jointly owned and that do not come with the feature of a beneficiary designation form, ownership of such assets can be transferred during the person’s lifetime to his or her revocable trust.
If a Massachusetts resident owns real property outside of Massachusetts, he or she should consider transferring the property to his or her revocable trust in order to avoid the need for a second probate (“ancillary probate”) in that other jurisdiction.
An individual funding his or her revocable trust usually does not result in loss of any control, because the individual usually serves as Trustee of the trust and still controls the asset; and in any event, the individual retains the right to revoke the trust and take back individual ownership of the trust assets.
Funding a revocable trust does not remove trust assets from exposure to the individual’s creditors because the individual has retained control. Similarly, funding a revocable trust does not remove trust assets from exposure to estate taxes at the death of the individual. Even when an individual avoids probate, there are still post-death administrative tasks.