Should we avoid probate at all costs? The short answer is no; panicked efforts to transfer assets to avoid probate frequently cause more harm than good. Here are some examples:
I frequently meet clients whose living trust is a 50+ page agreement mounted in a padded red or green three-ring binder containing 150 pages or more. Although there are exceptions, many of these packages are generated through a one-size-fits-all template distributed through a national vendor. Typically, 1/3 to 1/2 of the pages are irrelevant to the client’s particular circumstances. Sifting through countless pages to glean the essence of the plan is frustrating and unnecessary.
A seldom-mentioned downside to living trusts is the trustee’s lack of accountability to any court. Usually this is a good feature, and saves time and money for everyone. But not always.
Court oversight serves no purpose when the parents are the trustees, since it is their money and they should not be accountable to anyone. But it can be a big deal when a child becomes successor trustee, whether before or after the death of the last surviving parent.
For whatever reason, the successor trustee is seldom transparent in sharing information with the other beneficiaries, who are usually siblings. Human nature being what it is, the beneficiaries assume the worst, i.e., that there is a reason the trustee is keeping them in the dark. For example, since not required by the Oregon Uniform Trust Code, the trustee may feel there is no need to prepare or circulate an inventory of what is on hand. Unless prodded, the trustee may also decline to provide an accounting of receipts and disbursements. The trustee may take excessive trustee fees or pay personal expenses from the trust. The court does not police these items.
It is true the beneficiaries have limited rights under the Uniform Trust Code to file suit to obtain information, etc., but they must hire an attorney to do so. In a probate (or a conservatorship), the executor is required by law to share information, and must secure court approval prior to taking executor fees.
Beware of the rogue successor trustee when using a revocable trust.
Living trusts (also known as revocable trusts) are will substitutes that are frequently promoted as an “avoid probate” panacea everyone should have. As in TV commercials for medications, however, I need to share several unfavorable “side effects.”
Is a trust the same as a corporation, LLC or partnership? No!! It’s a completely different animal.
A trust is merely a contract between two parties. One party to the contract transfers property to the other, who is known as the “trustee.” The written trust agreement spells out what the trustee is supposed to do with the property. The trust agreement should also contain a slate of successor trustees who will serve if the original trustee resigns or is unable to serve.