Avoid Probate with Irrevocable or Revocable Living Trusts

Revocable living trusts and Irrevocable Trusts can help you ensure that your estate avoids probate and that it's distributed as you wish.


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The stepfather of a good friend of mine just passed away. Her mother died a couple of years ago, so now it’s time to disburse the estate. Her mom and stepfather revocable living trusts, so you would think it’s a no-brainer to divide the assets among their seven children.

But they’ve run into a couple of hiccups. The first: the original trust was drawn up in Nevada. The couple retired to Tennessee and had a new attorney review the trust and retool it for Tennessee laws. The problem: the attorney missed one word in the transfer of the document, which may now cost my friend and her sisters a huge portion of the estate. The second: because the seven heirs are not exactly the best of friends and have had some disagreements, the attorney says the estate may not be settled for more than a year, whereas the normal time frame for revocable living trusts to be settled after death is about a month.

So, you see, having a trust doesn’t automatically eliminate the problems that arise with blended families.

But it does avoid probate, in most cases.

What is Probate?

Probate is a court of law whose purpose is twofold:

1) It verifies your will is legal and that your wishes are carried out; and

2) If you don’t leave a will, a probate court will decide how to distribute your assets. Probate can take a few weeks or months, if your estate is small, or for larger estates, it can take years. Probate is where anyone who wants to contest a will files a petition. And the legal fees can quickly add up. Not only that, but once probate is filed, those records are available to the public.

Not every asset is subject to probate—bank accounts, retirement funds, and life insurance usually name beneficiaries, so those assets can go directly to your heirs.

But probate is a pain—tons of paperwork for your executor to wade through and file, including an inventory of every one of your assets. Creditors can come out of the woodwork with their claims. The estate can’t be settled until the court makes sure any potential heirs are notified.

Consequently, you probably want to avoid probate—at all costs. And you can do that by creating a will, establishing revocable living trusts, and/or making sure all your assets are titled properly.

Irrevocable and Revocable Living Trusts

Trusts are legal documents that can be set up prior to death and they survive a person’s death. They can also be created by a will and formed after death. A trust is a fiduciary relationship, in which one party, the trustor (also called trustmaker or grantor), gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. The primary reasons to form a trust are to:

  • Ensure your assets are distributed as you desire
  • Provide legal protection for your assets
  • Save your heirs time and streamline the paperwork of the estate
  • Avoid or reduce estate and inheritance taxes

Once your assets are placed in the trust, they belong to the trust itself, not the trustee. There are lots of different types of trusts, but the two basic and most common types are revocable living trusts and irrevocable trusts.

Revocable Living Trusts are created during your lifetime, and you can change them or revoke them at your pleasure. They may also simply be called Living Trusts. The mechanics are this: You establish the trust, put in the assets you desire, and you serve as the initial trustee.

You are the only person designated to add or remove property from the trust during your lifetime. The big advantage: any assets you transfer into the trust during your lifetime are not subject to probate (more on that in a little while), which can save you and your heirs a lot of money.

However, asset protection is not a major advantage, as with revocable living trusts, your creditors may possibly still access your assets within the trust (with a court order).

When you die, typically, revocable living trusts becomes Irrevocable Trusts.

An Irrevocable Trust cannot be changed or revoked after you create it. It’s permanent—until you die, and your assets are given to your heirs.

An Irrevocable Trust has a couple of advantages: 1) It protects the assets in the trust from lawsuits and judgments. Often used by business owners, doctors and attorneys, the assets in the trust cannot be removed by court orders and judgments; and 2) If you have a large estate and you have already reached your lifetime tax-free gift limit, and you are leaving additional funds (above the limit) to your heirs, the trust will exempt your estate from the 40% federal tax levy that it would normally be subject to for gifts above the exempted amount.

But as you can see from my friend’s story, a trust must be carefully scrutinized. Even attorneys make mistakes, so it behooves you to review the trust, line-by-line, especially if you’ve made any changes, to make sure that your heirs are well-protected.

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