A common concern for many clients is probate and whether it is required when a loved one leaves behind a last will and testament. Typically, clients want to find ways to create an estate plan that will help them with avoiding probate. Considering the time and expense of probate, which is a court-supervised process, it is understandable that many clients have that goal. Generally speaking, most estates need to go through probate, regardless of the nature or amount of assets. However, there are steps you can take to get around that.
If There is a Will, It Needs to be Probated
When a loved one passes away and they leave behind a last will and testament, it needs to be submitted to the probate court in order for your loved one’s last wishes to be fulfilled. The will must also be presented to the probate court so the court can appoint the executor. Assets must be located and protected so that they can be used to pay debts and fulfill the terms of the decedent’s will.
How to Avoid Probate Entirely?
Actually, there are several different estate planning options that can allow your estate to avoid probate. In fact, avoiding probate can be relatively easy if you know which method to use and how to use it properly. This article will describe four common probate avoidance methods that can be used as part of your estate planning: revocable living trusts, joint ownership of property, pay-on-death accounts, and gifts. If avoiding probate, while still ensuring that your estate will be distributed to your heirs, is your estate planning goal, then one of these options may be appropriate for you.
Avoiding Probate With Gifts
One strategy that you can use while you are still alive is transferring property to your heirs or beneficiaries as gifts. You can use this method for any type of property. Because you no longer own the property at the time of your death, the property does not need to go through the probate. With this method, you can reduce your estate substantially by gifting personal property and other assets before your death. Ask your probate attorneys about the tax consequences of gifting if you have questions.
Another method for avoiding probate is to convert bank accounts and retirement accounts into pay-on-death accounts, which is a relatively simple process. Typically, it is as simple as completing a form that names a beneficiary for those particular accounts. Like joint ownership, when you pass away your beneficiary will automatically own the property without having to go through probate. The same can be done for vehicles in some states and certain securities. It is also possible to create a special deed in some states that allows you to transfer real property to the beneficiary named in the deed.
Using a Revocable Living Trust to Avoid Probate
Trusts allow estate assets to be transferred to heirs, much like a last will and testament. But, trusts bring with them many advantages that using a last will and testament does not. For instance, trusts can be created to hold property so the property is not in your probate estate upon your death. The trustee of the trust owns the trust property once the trust has been funded. Trusts, like wills, still allow you to choose precisely how your property needs to be distributed after your death. At that point, your trustee can quickly and simply transfer the property from the trust to the selected beneficiaries, or hold the property in trust for them if they need asset protection. There is no need for the lengthy probate process. This can also be a benefit for purposes of the federal estate tax.
Using Joint Ownership of Property to Avoid Probate
Another strategy for avoiding probate is joint ownership. The benefit of joint ownership is that when the initial owner dies, the survivor will automatically retain ownership of the property without any additional actions being required. That also means there is no need for that property to go through probate. There are many different types of joint ownership arrangements that are available, but joint tenancy with right of survivorship is the arrangement that allows for automatic ownership. Make sure to learn about the drawbacks of joint ownership before taking this route, though.
Join us for a free seminar today! If you have questions regarding methods for avoiding probate or any other estate planning matters, please contact the experienced attorneys at The Potter Law Firm for a consultation. You can contact us either online or by calling us at (704) 944-3245 (Charlotte, NC or Huntersville, NC) or for individuals in Kentucky at (606) 324-5516 (Ashland, KY) or at (859) 372-6655 (Florence, KY).