Probate can be a beneficiary’s nightmare. It is a long and often confusing process that can become expensive. So, does an estate have to pass through probate? The simplest way for an estate to avoid probate is by setting up a Revocable Living Trust (RLT).
An RLT has two phases. First, in the creation phase, an individual (the Grantor) works with estate planning professionals to create the RLT while they are still alive. Second, in the trust administration phase, a Trustee manages and distributes the RLT assets after the death of the Grantor.
In the creation phase of the RLT, the Grantor creates the trust with an estate planning attorney. Once the RLT is established the Grantor then transfers the title of both real and personal property into the name of the trust. Examples of real property include the family home, farmland, or developmental property. Personal property includes bank accounts, life insurance policies, and stocks. Additionally, the Grantor names a successor Trustee to administer the RLT after their disability or death.
Two items that should not be initially titled into the RLT’s name are IRA’s and 401k’s. This is because renaming these financial holdings is seen by the IRS as an early withdrawal and will lead to them being taxed in the year they are transferred. Instead, the Grantor will typically make the RLT either the primary or contingent beneficiary of these types of accounts, depending on the advice provided by their estate planning attorney.
Titling assets into the name of the RLT is incredibly important in regard to probate avoidance. If an asset is left outside of the trust, then a Small Estate Affidavit or even full probate may become necessary to deal with the transfer of the asset. These take time and money that could have been avoided with a properly funded RLT.
In the administration phase of the RLT, after the disability or death of the Grantor, the Trustee manages the RLT assets according to the Grantor’s wishes and in the best interest of the beneficiaries. The Trustee has the duty of loyalty,[1] impartiality,[2] and prudent administration.[3] Because these duties are taken seriously by the Commonwealth of Virginia an individual may wish to not take up the responsibility of being a Trustee. For this reason, it is important for the Grantor to name a back-up Trustee, or even a professional Trustee.
The Trustee is expected to invest trust assets in good faith, distribute assets in accordance with the Grantor’s wishes, and comply with their fiduciary duty.[4] A Grantor then must be careful in her choice of Trustee and the Trustee may choose to work with a legal and – or a financial advisor during the post-death administration phase.
When created and funded properly an RLT will allow an estate to bypass probate leaving beneficiaries with peace of mind and increased financial stability as well as less administrative expenses, time delays, and public exposure.
TrustGuard™ 2025
TrustGuard™ enrollment for 2025 is now open. TrustGuard™ is a JGB proprietary, process-driven program designed for our clients who are serious about protecting their investment in their Trust-based Estate Plan with an annual review.
A subscription to TrustGuard™ includes: an annual review of your estate plan and trust funding assistance for the enrollment year, any required changes to your plan, access to our exclusive TrustGuard™ quarterly newsletter, and an invitation to our annual TrustGuard™ appreciation event. Clients who are eligible for TrustGuard™ are those who are renewing their TrustGuard™ membership and new clients who executed their trust documents in 2024.
Enrollment for the 2025 TrustGuard™ period ends on February 28, 2025. JGB clients who do not re-enroll during the enrollment period will not have another opportunity to become members of TrustGuard™.
Participation in TrustGuard™ is entirely voluntary. The TrustGuard™ enrollment subscription is billed at an annual flat rate. Clients who pay their enrollment in full prior to February 1, 2025 will receive a $100 discount off of the price of full enrollment. A separate email will be sent with an enrollment form to all eligible TrustGuard™ clients.
[1] Article 8. §64.2-764 Code of Virginia.
[2] Article 8. §64.2-765 Code of Virginia.
[3] Article 8. §64.2-766 Code of Virginia.
[4] Article 8. §64.2-763 Code of Virginia.