For North Dakota residents who are not familiar with the term probate, probate refers to the process by which a will is reviewed and the assets listed therein are distributed. This process is overseen by a probate court and can take months or even years, and it can impose administrative fees of up to 10% on heirs to an estate. Probate can be avoided with certain types of trust funds.
Many people in North Dakota neglect to speak with a professional about estate planning and probate because they think it will be too much of a hassle. However, trust funds can be established fairly quickly, without a lot of work or expense. A grantor, which is the person who creates the trust, can also benefit financially by creating an irrevocable trust. With an irrevocable trust, assets put into the trust cannot be touched or moved again, and they are no longer considered the property of the grantor. Thus, the grantor’s tax basis is lowered after transferring property to an estate.
If an individual wants more flexibility to add or remove beneficiaries or assets from the trust later in life, a revocable trust may be a better choice. However, with a revocable trust, the beneficiaries will always be required to pay estate taxes within nine months of something happening to the beneficiary. With an irrevocable trust, taxes can either be paid by the beneficiaries as income and interest are distributed during the guarantor’s life (with a simple trust or a complex trust), or they can be paid by the trust if the income and interest are retained (with a complex trust).
Individuals who want to ensure their children are taken care of in the future should speak with an estate planning attorney. An attorney can help someone decide whether an irrevocable or a revocable trust is the right way to go.