Families with large estates have a mixed blessing. Along with the benefit and enjoyment of wealth comes responsibility. Holding onto, and growing family wealth requires planning. Things can go wrong when the owner dies and the property must be transferred to their children. This is when estates become vulnerable to expensive disputes, negligence, and fraud. Large estate holders seek to minimize risk with careful estate planning.
Most wealthy families want their property to be transferred to their children quickly and inexpensively. For most people this involves a probate avoidance strategy. For large and complex estates the plan of choice usually involves a living trust. But is the trust always the better estate plan for large estates? This article briefly considers some of the pros and cons of a will versus a trust when a large estate is involved.
Probate of a will is generally seen as a costly and time consuming process. The advantages of probate, however, are usually overlooked or entirely ignored. Likewise, the potential problems that can arise with a living trust seldom receive the attention they deserve. This article considers the lesser known advantage of a will versus a trust.
The disadvantages of executing a will instead of a trust receive a lot of attention. If you create a last will & testament (will) your large estate will go through probate. If a person dies without a will or trust the estate generally goes through an administrative process similar to probate. For a wealthy estate this process can take a year of more. Probate is also a public process so anyone can attend your probate or look at the court file. Also, the legal costs of a probate are greater than the cost of establishing a living trust.
Although most wealthy families aim to avoid probate for these reasons, some well-informed owners of large estates familiar with the process actually plan for a probate. This is because the transfer of property is overseen by a judge, or probate commissioner who makes recommendations to the judge. Executors, interested parties, and sometimes lawyers are less likely to cause problems when a judge has jurisdiction over the transfer of their property.
If you have ever attended a probate hearing you may have observed the judge approve or disapprove the attorney fees charged by the lawyer in representing the estate, approve the sale of real or personal property, or even admonish parties or counsel not following the law or instructions. Although statistics are unknown, it seems probable that there is more fraud and bad faith in the administration of trusts than in the probate of wills because the transfer of property from a trust is generally not overseen by a probate court.
Often, the decision to involve a judge through probate may hinge on family characteristics. Some parents worry that a fight will erupt between their children. Often families don’t have a suitable trustee who can be trusted to distribute the estate promptly and fairly. In these situations we often recommend a professional successor trustee be nominated to handle the administration of the estate after death. Although professional trustees charge fees for their services, they are often a viable solution when a family does not have suitable successor trustee. Trustee negligence, misconduct, inaction, and self-dealing is generally more costly and time consuming than probate. A living trust is only as reliable as the named successor trustee.
If you have a large estate chances are that the best estate plan will involve a revocable living trust. Most estate planning attorneys, as a matter of course, would recommend that your large estate pass through a living trust. This, however, doesn’t mean that a living trust is the best option for every family.
Although probate has a reputation as something to be avoided, this may not be the case for families that might benefit from judicial oversight. At the Living Trust Source every estate plan is customized for the client’s family. We help our clients understand the advantages and disadvantages of transferring wealth by either a will or trust.
Attorney at Law
Estate Planning Attorney Reno, Nevada