What Is Probate?
Probate is a process of “adjudicating” a will. It involves lawyers and judges and courts determining what the will really means and carrying out its instructions. It can be expensive.
Ways of avoiding costly Probate
1.Transfer Property to a Trust
Revocable living trusts or inter-vivos trusts were invented to help people bypass the probate process. Unlike the property listed in your will, the property in a trust is not probated, so it passes directly to your inheritors. You simply create a trust document and then transfer the property title to the trust. Many people name themselves as the trustee to keep total control of the trust property. A trust also allows you to name alternate beneficiaries; it does not require a waiting period after death and is much harder to attack in court.
2. Set up Payable-on-Death Registrations
Also known as transfer-on-death accounts, these allow you to name one or more beneficiaries of the account to avoid the probate process. It’s simple to create and usually free, and the beneficiary can easily claim the money after the owner dies. The ability to name a beneficiary, however, is a feature that you must add to the account, but most banks, savings and loans, credit unions, and brokerage firms allow you to do so. It requires some extra paperwork and time, so you’ll need to be persistent and ask your institution for the required forms.
3. Take Advantage of Joint Ownership
Adding a joint owner to a bank account, an investment account, or to a real estate deed will also avoid probate, provided that it’s clear that the account is owned as joint tenants with rights of survivorship and not as tenants in common. That word “survivorship” makes all the difference. Rights of survivorship guarantee that when one owner dies, their share of an asset automatically transfers to the survivor or survivors.
4. Use a Revocable Living Trust
A revocable living trust is a written agreement that covers three phases of your life:
- While you’re alive and well
- If you become mentally incapacitated
- After you die
Signing a revocable living trust agreement by itself isn’t enough to avoid probate of your property. You must then title your assets in the name of your trust. Your assets will only avoid probate after your revocable living trust has become the record owner of your assets instead of you. This process is known as “funding” your trust. Think of your trust as a bucket. You have to fill the bucket with your assets to ensure that they’ll avoid probate. Any that remain outside the bucket will require probate to transfer to a living beneficiary at the time of your death unless they have a beneficiary designation or they’re owned with rights of survivorship.
5. Payable on Death Accounts
This is similar to designating a beneficiary but for a bank or credit union account. It is sometimes referred to as a Totten Trust, a tentative trust, an informal trust, a revocable bank account trust, or an ITF (in trust for) Account. For some reason, you cannot have a secondary beneficiary, so be sure to keep this one updated carefully and don’t go heli-skiing with the beneficiary! One extra bonus here is that these accounts are eligible for a completely separate insurance limit than your account without a pay on death designation.
6. Family Limited Partnerships
Now we’re really getting into the big-ticket, complex methods of avoiding probate. A Family Limited Partnership is simply a limited partnership where all the partners are members of a single family. Usually, the general partners are the older generation and the limited partners are the younger generation. Like any partnership, there has to be a legitimate business going on here somewhere. So this tends to be a good way to pass on a closely held family business, a farm, or rental properties.
It is particularly useful for avoiding estate taxes. The older generation gifts shares of the partnership to the younger generation. Because the younger generation doesn’t have full control over the partnership, those assets are discounted significantly, so less of the estate tax exemption is used up than they really received in assets.
Why should you avoid probate?
Although probate is often straightforward, many people want to avoid it. The reasons can vary, but there are some common complaints about the process:
« It can be slow.
In some cases, it can take years for a probate court to finalize an estate, especially if it’s complicated or involves a contested will.
« It can be costly.
Costs vary from state to state, but probate generally entails executor fees, attorney costs and other administrative expenses, such as appraiser’s fees. In some cases, these charges can accumulates quickly. The expenses are exacerbated if the process drags on for a while.
« It is public.
Since it is a state legal proceeding, what goes on in probate court does not stay there. All the material in the probate process goes into the public record
Get Help
Do you have more questions about Probate? Our attorneys are ready to give you all the help and answers you need. Call us today.
FAQs
Is probate the same in every state?
No, Probate laws differ across the country, so it’s important to be familiar with your state’s mandates so your final wishes can be administered efficiently.
Should I avoid probate?
Although probate is often straightforward, many people want to avoid it for different reasons and some common complaints about the process like it’s cost nature and fact that it is very slow.
Why Should You Avoid Probate?
The probate process can last from six months to two years. It will also cost various filing fees, publication charges, and attorney fees, and if probate drags on, these fees will continue to go up.
