When a person (decedent) dies with a will, the decedent’s will must enter a court process called probate in which a personal representative (a.k.a, executor) is assigned to transfer the decedent’s property to the heirs named in the will. Probate is also available when a decedent dies without a will. This is a lengthy process that comes with costs and, at times, inconvenience. To avoid this process, many estate plans use trusts.
Most estate plans include revocable, living trusts. These are documents that create a legal entity (a trust) that owns property. The creator of the trust (settlor) transfers ownership of their property to the trust. The trust charges a trustee (or trustees) with managing the funds, and upon the death of the settlor, the trustee has the authority to convey (transfer) the trust’s property to the named beneficiaries of the trust per the instructions in the trust document itself. One can loosely compare this process to the probate process, where the settlor is the decedent, the trustee is the personal representative, and the beneficiaries are the heirs. However, this is all done without going to court. While probate isn’t often the nightmare some make it out to be, it can greatly simplify the transfer of, for example, property held outside the decedent’s home state.
Example #1: The decedent moved their car into the trust, so the title to the car indicates that its owner is the trust itself. The trustee presents the trust document, the death certificate, etc. to the Department of Motor Vehicles, and then the DMV accepts the trustee’s signature in signing over the title to the beneficiary that the trust designates will be its new owner.
Example #2: The decedent is a resident of Virginia and owns a vacation home in Delaware. The decedent conveyed the vacation home into their trust. Upon death, the trustee provides a title company with the trust, death certificate, etc., and the trustee is able to sign a deed conveying the vacation home to the beneficiary that the trust designates will be its new owner. If the decedent hadn’t moved the vacation home into the trust, both the Virginia and Delaware courts would have to get involved, creating and expensive hassle.
During the settlor’s lifetime, the trust document isn’t public record, so the settlor’s plans are kept private.
This is by no means a comprehensive description of trusts, but rather a brief mention of why settlors create trusts. Wills are hardly obsolete, and in fact can help avoid the expense of an annual accounting associated with a testamentary trust. See Va. Code § 64.2-1307. Still, trusts are a powerful, flexible tool that streamline the process of administering an estate. Speak with an attorney if you think this may be right for you.
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Rob Bodine is a Virginia attorney focusing his practice on real estate and intellectual property law. He’s currently Virginia counsel with First Class Title, Inc., a Maryland title insurance and settlement company. Rob is also a licensed title insurance agent in Maryland and Virginia.