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In this video I not only describe the difference between a last will and testament based plan and a revocable living trust based estate plan, but I’m going to describe some of the deeper nuances that are involved in this whole “avoid probate” discussion.

So there’s quite a bit written and said about wills versus trusts. On the surface the description goes something like this, “You can either have a will-based estate plan or a trust-based estate plan. If you have a will-based estate plan (which includes your will, powers of attorney, certain health care documents), you leave all of your assets in your name (your home, other real estate, brokerage accounts, bank accounts, and LLC or other business interests to name a few). In your will, you designate who will inherit your estate assets and you will designate an executor of your estate. A will plan is really simple to establish because you don’t have to retitle any of your assets - you simply leave everything in your name. If you become incapacitated, you’ll have the durable power of attorney which makes it easy for the people that you designated in that power of attorney to transact for your during your lifetime if you can’t transact for yourself, but the main knock on the will plan is that, generally speaking (I’ll describe some exceptions later in this video), your assets in your name will be frozen and your survivors will be forced to go through a court and attorney-involved probate process in order to gain access to those assets that were in your name and frozen when you died. For example, if when you die you have a rental property that is solely in your name, that probate court proceeding will be required to enable either your executor to sell the property and disburse the proceeds to your heirs, or if it is not appropriate for the property to be sold, a judge will need to sign a court order ordering that title to the rental property be transferred to the appropriate heir or heirs. Now it’s impossible to accurately predict probate expense and how long a probate will take (because each one is different and there are so many moving parts), let’s just assume there’s a married couple with a Will plan and the total value of their various estate assets is $3M. Just for kicks, let’s assume that when each spouse dies, there are $20,000 of probate expenses and each probate takes nine months, from start to finish, to complete.

Now, let’s look at how that compares to the revocable living trust-based estate plan. With a trust-plan, you create a trust and all of the “how my estate gets distributed” provisions and the “who handles the distribution of my estate when I die” provisions are included in your trust instead of your will. And a key to using a trust to avoid probate includes transferring those assets that are in your name and would have to go through probate if they were in your name - to your trust. The thing to know is - assets that are titled in your trust when you die are not frozen and they do not need to go through the court and attorney-involved probate process. The successor trustee that you designate in your trust instrument will have immediate access to be able to sell assets that need to be sold and to transfer trust assets to your heirs who are also known as the beneficiaries of your living trust. So the $20,000 probate expense (or whatever the number might be) and the nine month probate delay (or whatever the time frame might be) is avoided.

Now this video looks a little closer because it’s often not that black and white.

0:00 Wills versus Trusts
0:22 Will-Based Estate Plan
2:10 Living Trust-Based Estate Plan
3:08 The Partially Funded Living Trust
4:30 The Completely Unfunded Living Trust
5:33 The "One Party Probate"
7:32 Transfer on Death (TOD) and Payable on Death (POD)
9:40 Summary