Utilizing Trusts to Avoid Probate: A Guide to Probate Avoidance for All

The function of creditors and the deceased’s debts in a probate case are both important and necessary to settle the deceased’s estate. Personal representatives are required to notify known creditors and also publish notices for any potential unknown creditors. This gives them a time limit within which they can file a claim against the estate for what is legally owed to them. The personal representative has the authority to approve or deny the claims, and if they deny it, the creditor can take the matter to court. This process prevents any late claims being made against the estate once it has been closed and its funds distributed.

With the rapid decline in local newspapers, the traditional publication rule is no longer as efficient in reaching out to potential unknown creditors. However, the use of legal newspapers that still accept classified advertisements is one way to ensure that all potential creditors have been accounted for. Additionally, conducting a credit check on the deceased can reveal creditors that were previously unknown. All credit cards and subscriptions should also be canceled to prevent any more debts from accruing.

Some states have extended the publication requirements to trusts and, therefore, it is recommended to include these requirements in the trust language. If there is a possibility of late claims being made, a probate can be opened for assets that are not passing through the trust, in order to take advantage of the publication protection on claims. The bulk of the assets can then pass through the trust as usual.

Debts payable by the probated estate can include unexpected claims, such as those made by the state. Estate Recovery allows the state to claim repayment of benefits, such as Medicaid for nursing home care, from the deceased’s probated estate. Repayment under this law can deplete the probate estate accounts, leaving nothing for the heirs. However, this can be avoided by not filing a probate case, as the law refers to claims against the estate and not against non-probated assets, such as those in the name of a trust.

The appointment of a trust protector has become very popular, especially in the management and distribution of trust assets according to the grantor’s instructions. Naming a trust protector in the trust document ensures that the trustee carries out the trust in accordance with the grantor’s wishes. A trust protector oversees the trustee’s actions, vetoing any that might not be in the best interest of the beneficiaries.

Trust protectors are commonly used in irrevocable trusts for long-term purposes, and having them even in revocable trusts to be irrevocable upon the grantor’s death is now advisable. A trust protector should not be a beneficiary or the attorney for the trustee or the grantor. The powers of a trust protector should be clearly defined in the trust document, including the power to remove or replace trustees, settle disputes between beneficiaries, and change trust terms in the event of significant legal or tax changes. They should also act in a fiduciary capacity toward the beneficiaries and be compensated according to the trust document.


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