Many clients choose to use a revocable “living” trust as an alternative to a will as their primary estate planning document.  A last will and testament is merely written instructions stating who will receive your assets after your death and whether they will receive those assets outright or in a trust.  In order to pass clear title ownership of those assets to the beneficiaries of your will, the will must go through the court-supervised probate process to allow creditors an opportunity to be paid. At the end of the process, the executor of the will (or administrator of an estate where there is no will) must obtain court approval to convey ownership of assets like real property to the beneficiaries.

A trust does not go through a probate process when the creator (“settlor”) of the trust passes away.  The trust will instruct the “successor trustee” to convey ownership of the trust-owned assets (by deed, title certificate, change of bank account name) to the beneficiaries, and the successor trustee will do so without need for any filing with or approval by a court.  Therefore, a house or other parcel of real property may be deeded to a beneficiary without delay following the trust creator’s death.  However, that may not be the end of it.  The revocable trust may need to be “probated.”

As indicated above, the purpose of probate is to allow creditors of the property owner an opportunity to be paid before the property can transfer to the owner’s beneficiary.  While having property in the name of a trust will allow immediate transfer of ownership to beneficiaries, ownership of property in a trust does not affect the claims of the trust creator’s creditors.  Mississippi Code Section 91-8-504 (a)(6) states: “After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable immediately preceding the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, and the expenses of the settlor’s funeral and disposal of remains . . .” unless a notice is sent to the settlor’s creditors (and published in the local newspaper) giving them ninety days in which to file a claim with the trustee for payment of their debts.

Therefore, if the beneficiaries of a trust wish to sell the property they receive from the trust, it may be necessary for the new trustee to publish and send notices to creditors in order to obtain clear title for the sale.