Living Trusts

What is Probate and why does everyone want to avoid it?

What happens if someone objects to the Will?

Does probate administer all of the property of the deceased?

Do I get paid for serving as an Executor?

How much does probate cost? How long does it take?

What is a Living Trust?

What are the advantages of having a Living Trust?

Will I lose control over my assets if I establish a Living Trust?

What assets are left outside of my trust?

If I transfer real estate to my Trust, can the bank call my loan?

Why do I need a Pour-Over Will if I have a Living Trust?

Q: What is Probate and why does everyone want to avoid it?

When a loved one passes away, his or her estate often goes through a court-managed process called probate or estate administration, where the assets of the deceased are managed and distributed.  If your loved one owned his or her assets through a well-drafted and properly funded Living Trust, it is likely that no court-managed administration is necessary - the successor trustee will administer the distribution of the assets.  The length of time needed to complete the probate of an estate depends on the size and complexity of the estate and the local rules and schedule of the probate court.


Every probate estate is unique, but most involve the following steps: 

  • Filing of a petition with the proper probate court.
  • Notice to heirs under the Will or to statutory heirs (if no Will exists).
  • Petition to appoint Executor (in the case of a Will) or Administrator for the estate.
  • Inventory and appraisal of estate assets by Executor/Administrator
  • Payment of estate debt to rightful creditors.
  • Sale of estate assets.
  • Payment of estate taxes, if applicable.
  • Final distribution of assets to heirs.
  • Accounting of all financial transactions.

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Q: What happens if someone objects to the Will?

An objection to a Will, known as a "Will contest," can occur during the probate proceedings and can be incredibly costly to litigate.

In order to contest a Will, one has to have legal "standing" to raise objections.  This usually occurs when, for example, children are to receive disproportionate shares under the Will, or when distribution schemes change from a prior Will to a later-drafted Will.  In addition to disputes over the tangible dsitributions, Will contests can be a quarrel over the person designated to serve as Executor.

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Q: Does probate administer all of the property of the deceased?

Probate is primarily a process through which title is transferred from the name of the deceased to the names of the beneficiaries.  Certain types of assets, called "non-probate assets," do not go through probate.  These include:

  • Property in which you own title as "joint tenants with right of survivorship."  Such property passes to the co-owners by operation of law and does not go through probate.
  • Retirement accounts, such as IRA and 401(k) accounts, where there are designated beneficiaries.
  • Life insurance policies.
  • Bank accounts with "pay on death" (POD) designations or "in trust for" designations.
  • Property owned by a Living Trust.  Legal title to such property passes to successor Trustees without having to go through probate.

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Q: Do I get paid for serving as an Executor?

Executors are reimbursed for all legitimate out-of-pocket expenses incurred in the process of management and distribution of the estate.  In addition, you may be entitled to statutory fees, which vary from location to location and often depend on the size of the probate estate.  The Executor has to fulfill his or her fiduciary duties on behalf of the estate with the highest degree of integrity, and the Executor can be held liable for mismanagement of estate assets. It is recommended that the Executor retain an attorney and an accountant to advise and assist with the various duties.

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Q: How much does probate cost? How long does it take?

The cost and duration of probate can vary substantially depending on a number of factors, such as the value and complexity of the estate, the existence of a Will, and the location of real property owned by the estate.  Will contests or disputes with alleged creditors over the debts of the estate can also add significant cost and delay.  Common expenses of an estate include Executor's fees, attorney's fees, accounting fees, court fees, appraisal costs and surety bonds.  These typically add up to 2% to 7% of the total estate value.  Most estates are settled through probate in about 9 to 18 months, assuming there is no litigation involved.

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Q: What is a Living Trust?

A Living Trust can be used to hold legal title to your assets and provide a mechanism to manage them. You (and your spouse) are the Trustee(s) and beneficiaries of your trust during your lifetime.  You also designate successor Trustees to carry out your instructions as you have provided, in case of death or incapacity. Unlike a Will, a Trust usually becomes effective immediately after incapacity or death. Your Living Trust is "revocable," which allows you to make changes and even to terminate it.   One of the great benefits of a properly funded Living Trust is the fact that it will avoid probate and minimize the expenses and delays associated with the settlement of your estate.

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Q: What are the advantages of having a Living Trust?

Like a Will, a Living Trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a Living Trust has certain advantages over a Will.  A Living Trust allows for the immediate transfer of assets after death without court interference.   It also allows for the management of your affairs in case of incapacity, without the need for a Guardianship or Conservatorship process.  With a properly funded Living Trust, there is no need to undergo a potentially expensive and time-consuming public probate process.   In short, a well organized estate plan using a Living Trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and in an efficient and low-cost manner.

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Q: Will I lose control over my assets if I establish a Living Trust?

Absolutely not! During your lifetime when you are mentally competent, you have complete control over all your assets.   You may engage in any transaction as the Trustee of your Trust that you could before you had a Living Trust.  There are no changes in your income taxes.  If you filed a 1040 before you had a Trust, you continue to file a 1040 when you have a Living Trust.  There are no new Tax Identification Numbers to obtain.  The Living Trust can be modified at any time or it can be completely revoked if you so desire. Upon your incapacity, your Durable Power of Attorney comes into effect and allows your loved ones to transact on your behalf, according to the instructions you have laid out in the Living Trust. Upon your passing, the Trust becomes irrevocable so that no one can change your testamentary wishes. For married couples, the surviving spouse still has total control over his or her share of assets after its transfer to the survivor's Trust, and the Trust becomes irrevocable only as to the deceased spouse's share.

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Q: What assets are left outside of my trust?

Assets with beneficiary designations, such as a life insurance policy or annuity payable directly to a named beneficiary, need not be transferred to your Living Trust.   Furthermore, money from IRAs, Keoghs, 401(k) accounts and most other retirement accounts transfer automatically, outside probate, to the persons named as beneficiaries. Bank accounts that are set up as payable-on-death accounts (POD for short) or an "in trust for" account (a "Totten Trust"), with a named beneficiary, also pass to that beneficiary without having to be titled into your Trust.  However, when you do your estate planning, it is important to seek the counsel of an experienced attorney who is familiar with the intricate regulations of retirement accounts and can coordinate the appropriate beneficiary designations with your overall estate plan.

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Q: If I transfer real estate to my Trust, can the bank call my loan?

Federal law prohibits financial institutions from calling or accelerating your loan when you transfer property to your Living Trust, as long as you continue to live in that home.  The only exception to the federal law, enacted as part of the 1982 Garn-St. Germain Act, is that it does not provide protection for residential real estate with more than five dwelling units.  However, we find that most clients who do own residential property with more than five dwelling units tend to own them through a business entity and not directly in their individual names, and hence are not concerned with the five dwelling exception.

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Q: Why do I need a Pour-Over Will if I have a Living Trust?

A Pour-Over Will is used first to name a Guardian for minor children. Second, it protects against intestacy in the event any assets have not been transferred into the Trust at the death of the Trustmaker/Owner. It will also invalidate any previous Wills which you may have executed.  Its function is to "pour" any assets left out of the Trust into it so they are ultimately distributed according to the terms of the Trust.

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The attorneys of O’Diam & Estess Law Group, Inc., assist individuals, families and business owners throughout the Miami Valley, including Dayton, Kettering, Oakwood, Centerville, Beavercreek, Xenia, Springfield, Springboro and Troy, in Greene County, Montgomery County, Clark County, Warren County and Miami County.

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