Probate refers to the legal process by which the Court supervises the settlement of your "probate estate". In general, the Court monitors the disposition of claims against an estate, including the payment of state and federal taxes, protects the interests of beneficiaries and creates a public record of the disposition of claims and the distribution of assets.

1. Expensive: Court costs, attorney's fees, filing fees, executor commissions, and other probate costs can amount to as much as 5% of the value of the assets subject to probate.
2. Time-Consuming: It can take months or years to settle your estate depending upon the composition of assets in the estate, the amount of assets and the experience of your executor.
3. No Privacy: All documents filed as part of the probate process become public records so that anyone may review the Will, inventory, accounting, and other financial records that must be filed.
4. Complexity: The probate process can be complicated depending on the size and composition of the estate assets. Even if the assets in Virginia do not require a complex administration, there may be assets in another state which require a separate probate proceeding (called ancillary administration) before they can be distributed to beneficiaries.

1. Probate assets are those assets which are distributed according to the terms of your Will. This includes:
   1. Assets owned by you individually.
   2. Your fractional interest in jointly owned assets as a tenant-in-common.
   3. Benefits payable to your estate.
2. Non Probate assets pass directly to beneficiaries without reference to a Will and without qualification of an executor of the estate. These assets include:
   1. Life insurance benefits.
   2. Pension and profit sharing plan accounts (if a beneficiary is designated).
   3. Bank accounts, CD's, treasury notes, etc. if there is a P.O.D. ("pay on death") or T.O.D.("transfer on death") designation.
   4. Assets owned jointly with the right of survivorship. Note that joint ownership alone is not sufficient to cause complete ownership to vest in a surviving joint owner since joint ownership as "tenants in common" does not vest complete ownership in the survivor.
   5. Assets titled in a Revocable Trust.

1. Beneficiary designations, i.e. life insurance, pension plans, POD and TOD designations.
   1. Advantages:
      1. Avoids probate
      2. Very easy to accomplish
   2. Disadvantages:
      1. Cannot be used for most assets such as stocks, bonds, real estate.
      2. Should not be used for minor beneficiaries.
      3. May cause an unequal division of your assets among your beneficiaries.
      4. Does not usually provide for the most effective estate tax planning so it may cause increased estate taxes.
2. Joint ownership with the right of survivorship.
   1. Advantages:
      1. Avoids probate.
      2. Relatively simple to accomplish.
   2. Disadvantages:
      1. Changing ownership from your name individually by adding one or more joint owners may result in an unintended taxable gift for gift tax purposes.
      2. Jointly owned assets may be subject to the debts of all joint owners.
      3. All joint owners must join to convey an interest in real estate. If one joint owner becomes incompetent, you may have a big problem.
      4. Joint ownership only avoids probate when the first joint owner dies. When the last joint owner dies, the asset is a probate asset in his or her estate.
3. Revocable Living Trust.
   1. What is a revocable living trust? Also sometimes known as a "Living Trust" or an "inter-vivos trust". In general, a trust is an arrangement where one person, called a Trustee, holds assets for the benefit of someone else, a "beneficiary". A revocable living trust is a trust that you set up during your lifetime to hold title to assets for your benefit. You reserve complete control over the trust and can amend or revoke any provision of the trust at any time. Usually, you will act as the Trustee. The Trustee is given authority to manage the assets, to pay your bills, and to follow any other directions that you may give. At your death, the trust assets are distributed as you direct, so that the trust acts much like a Will.
   2. Advantages during your lifetime:
      1. The trust is a private agreement so that the trust does not become a public record and privacy is preserved.
      2. You reserve complete control and retain the right to alter or amend any provision in the trust.
      3. You can be your own trustee and designate a successor trustee to step in for you if you become incapacitated. This allows some other person that you choose to manage your financial affairs in the event that you become unable to do so. This avoids the necessity of the Court appointing a guardian to manage your assets.
   3. Advantages upon your death:
      1. Assets titled in the name of your trust are not subject to probate because they are titled in the name of the Trust and are distributed according to the terms of the trust. Technically, you don't own the assets, the Trust owns the assets so they are not part of your probate estate.
      2. Note that if you have assets in more than one state, by placing title to all assets in a trust, you can avoid multiple probate proceedings.
      3. The trust document is not recorded and privacy is maintained. The identity of beneficiaries and trust assets is not a matter of public record, unlike probate proceedings.
      4. It is more difficult to contest a trust than a Will.
      5. The trust can continue for the benefit of any beneficiaries if you believe that financial management is needed (i.e. for a minor or anyone else who may not be able to manage funds wisely.)
   4. Disadvantages:
      1. There are legal fees for the preparation of the trust document and perhaps some small costs for transferring assets into the trust. However, these costs are typically a small fraction of the ultimate probate fees you will save.
      2. You must retitle your assets into your Revocable Trust. Unless title to assets is transferred to the trust, little is accomplished.

1. Real Property:
   1. Residence. A new deed should be prepared transferring title into your trust. Even if you have an outstanding mortgage, federal law permits you to transfer title into your trust without obtaining lender approval.
   2. Other Real Property. All other real property should be transferred into your Revocable Trust, especially property which is not in Virginia so that ancillary probate proceedings can be avoided in the other state. If real property other than your residence has a mortgage, you may have to obtain lender approval before transferring title into your trust.
   3. Recording Taxes. Since you are not transferring title to real property into your trust as part of a sale, there are no recordation taxes and you must only pay a nominal filing fee.
2. Personal Property:
   1. Tangible Personal Property such as cars, household goods, jewelry, personal effects, etc. are unusually not added to a trust. Typically, these assets are distributed according to the terms of your Will or on a more informal basis by a private letter of instructions.
   2. Intangible Personal Property such as bank accounts, stocks, bonds, mutual funds, promissory notes, partnership interests, etc. should be retitled into the name of your trust.
   3. Life Insurance. In many cases it will be helpful to designate your Trustee as the beneficiary of your life insurance policies.
   4. Retirement Plan Assets. If you are married you will probably want to designate your spouse as the primary beneficiary of all retirement plan benefits so that the surviving spouse can "roll-over" the benefits without paying income tax immediately. In this way, the spouse will only pay tax on the benefits as they are withdrawn from the roll-over account.

1. Compare "probate" estate and "taxable" estate. When the Grantor (owner) of a revocable trust dies, the assets in the trust are not subject to probate but all of the assets are still part of the estate for federal and Virginia estate tax purposes. Therefore, merely creating and funding a revocable trust does not affect estate taxes in any way. It is possible, however, to incorporate various estate tax planning provisions in the trust to reduce or defer estate taxes. In other words, a revocable trust can be used to save estate tax in the same way that a properly drafted Will can, but it is the special planning within the document, not the mere existence of a trust that reduces or defers overall estate taxes.
2. Since estate taxes and probate are distinct issues, make sure your revocable trust takes both into consideration. Most of the "packaged" trust forms that are available in books do neither. This is a classic case where "you get what you pay for". There is no substitute for the advice and help of a competent professional.