Beware the Frozen Asset Period

Most folks have heard that a properly designed and implemented revocable trust based estate plan will allow trust heirs to avoid Court supervised (and attorney accompanied) Probate proceedings at death. While this is true, the avoidance of Probate may not be the most important attribute of a properly implemented revocable trust based estate plan.

While in most circumstances the minimization or elimination of Probate proceedings is certainly advisable to control post-mortem administration expenses, the most important benefit of avoiding Probate may well be the ability of the successor trustee of the revocable trust to avoid having to await a Court order before the successor trustee is able to commence management of trust owned property. In Probate settings, it is not at all uncommon for a Personal Representative to have to wait for weeks or even months for the Court to issue orders allowing the Personal Representative to exercise authority over assets subject to the Probate proceeding. A properly designed and administered trust allows the named successor trustee to have almost immediate control over the trust owned assets rather than having to wait for the Probate Court to enter orders granting control authority.

While this difference in “time of control” may not seem that important, consider the recent volatility we have experienced in our stock markets. While awaiting the Probate Court order granting control authority during a period of extreme volatility, the personal representative has no ability to sell (or purchase) Probate estate assets. Imagine the damage that could be done to a Probate estate marketable securities portfolio in an extreme down market while the personal representative is waiting for the Court to grant authority! The period of time that the personal representative of an estate has no authority is what is often referred to as the “frozen asset” period.

On the other hand, marketable securities held by a trust at death are immediately controlled by the named successor trustee once evidence of authority is presented to the account custodian. Accordingly, in most trust administrations, effective control is passed to the successor trustee within no more than a week of a death, thus significantly reducing the “frozen asset” time period. This significantly decreases the risk of being caught in a down market with no ability to react in a timely manner.

The ability to avoid the “frozen asset” problem is just another good reason to design and implement a revocable trust based estate plan that avoids or minimizes Probate proceedings! Contact us today call 772-828-2295 to learn more!