What Is Probate, and Why Do You Want to Avoid It?
Probate is when the court oversees your asset distribution after death. The court first appoints an executor over your estate, and that person must pay all creditors and debts, then transfer remaining assets to the beneficiaries of the estate. It is important to note that the probate court happens whether you have an estate plan or not. So, do not assume that, because you created a will, your family skips probate. Instead, the court will see that your wishes are carried out in your will as part of the probate process.
When there is no will, probate is a must, too. The court will distribute assets to your family in the order designated by the statute.
Probate is time-consuming, and it can take months (sometimes years when there are disputes) to resolve. It is also costly, especially if loved ones have to hire an attorney to help navigate through the process.
While it does take an upfront investment to avoid probate in the future, the amount it could save your loved ones, later on, makes up for it.
How Can You Avoid Probate?
Determining options for avoiding probate will depend on the type of property you own, how it is owned, and your state laws. It is always best to consult with a local estate planning attorney to explore your options for avoiding probate. While you wait for a consultation, here are a few ideas that may work:
1. Give Away Your Property
You can transfer ownership of your property before you pass away to those you want it to go to. If you were to transfer that property, then there would be no reason to probate your assets. You can do this form of gifting as part of your estate plan, but if you give away your assets, you no longer have access to them. Therefore, if a time comes where you need those assets, you will not have the benefits of them.
Furthermore, gifting can lead to taxes, depending on the value of that gift. In most cases, the assets you transfer to others will not meet the requirements for the federal gift tax.
2. Create a Joint Ownership Agreement on All Real Estate Property
If you have joint ownership of the real estate, then when you pass away, the title automatically transfers into the name of the joint owner. However, survivorship rights come in three forms, and they depend on where you live as well.
- Joint tenancy rules with the right of survivorship. If you were to pass away, under this rule, the property title would automatically pass over to the joint owner.
- A tenancy that is automatic due to marriage rights. This applies in some states, but not all. In this case, the property automatically transfers over to the other spouse when one spouse dies.
- The right of community property. Community property states do allow for the property to automatically transfer to the other spouse, but only if you live in one of those states, including Alaska, Arizona, California, and a few others.
3. Use Pay on Death Transfers for Accounts
Most financial accounts request a pay-on-death beneficiary. That means, when you pass away, the party you name automatically inherits the funds in that account. These do not have to go through probate, because they are transferred securely using a transfer-on-death (TOD) certificate. Most states recognize these rules, except Louisiana and Texas.
Accounts that you can use a TOD include bank accounts, stocks, and retirement accounts. These beneficiary designations are usually something you are prompted to fill out when you open the account, and you can change them at any time. You may want to review your financial accounts to see who your current beneficiary is and change it if necessary.
4. Create a Living Trust
A revocable living trust is by far the best option for avoiding probate, and it helps bypass some of the hassles of gifting your estate. You do not have to have a large estate, but a living trust works well if you do.
To create a trust, you will need the assistance of an attorney. An attorney will create a trust which you then transfer your property into. Therefore, you are no longer the owner of that property – the trust is. All property titles are transferred into the trust, and anything you do not transfer over to the trust will then be subject to probate.
Now, even though your property was transferred into the trust, it is yours. You can control it while you are alive, and upon your death, the property in that trust would then transfer to the parties you designated in the trust documents. Transferring property within a trust does not require the probate court’s oversight.
Creating a trust does cost more than making a general will, but that could be seen as an investment. After all, you are saving your loved ones from having to hassle with the courts, pay for the filing fees and an attorney to assist you, and the time it takes just to close out an estate and have time to grieve.
Set up a Living Trust Today
If you would like to save your loved ones from the costs and hassles of probate court, you can set up a free case evaluation with the Law Office of Andrew M. Lamkin, P.C., today. While a lot of offices are closed due to the COVID-19 outbreak, we are still available for consultation via video conferencing. We are more than happy to go over your current assets, beneficiaries, and find the best solution for your family.
Call our office today or ask a question by completing the online contact form.
Andrew Lamkin is principal in the law firm of Andrew M. Lamkin, P.C., where he focuses his practice in the areas of elder law, estate planning and special needs planning, including Wills and Trusts, Medicaid planning, estate administration and residential real estate transactions. He is admitted to practice law in New York and New Jersey.
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