You will invariably see references to “probate avoidance” if you poke around on the internet looking for information about estate planning. Before you make any decisions, you should have an understanding of the matter, and we will provide an explanation here.
Court Supervision
When a will is used to transfer assets, the person that creates the document (the testator) names an executor. This is the person who will complete the hands-on estate administration tasks after the testator’s death.
You may remember a scene in a movie or television show where an executor reads the will to people who expect to be named in it. The implication is that the executor will be able to distribute the assets in short order, but this is not the case.
A will is admitted to probate, and the court provides supervision while the estate is being administered. This process serves a purpose because creditors are notified about the passing of the decedent, and they are given time to come forward seeking payment.
Another function of the probate court is the “proving” of the will. The validity of the document is considered by the court, and if anyone wants to challenge the terms, they can make a case while the estate is being probated.
This court will also preside when a person dies intestate, which happens when someone passes away without any estate planning documents. The court would appoint a personal representative to act as the administrator, and ultimately, the assets would be distributed under the intestate succession laws.
Probate Avoidance
Now that you know what probate is in a general sense, we can explain why some people try to avoid it. The process is not inherently bad, but it will take months to run its course at minimum, and the inheritance is tied up while the estate is in probate.
Expenses can accumulate, and the general public can access the probate records so your final affairs are not conducted in private when your estate goes through probate.
Probate-Free Transfers
Even if you are not intentionally attempting to avoid probate, there are some types of transfers that are simply not subject to the process. Joint tenancy is one of these situations.
You can add a joint tenant to property, and this person would own half of the property. If you predecease your joint tenant, he or she would inherit your interest in the property, and the probate court would not be involved.
A payable on death account (POD account) is a type of account that can be opened at a bank (or a transfer on death (TOD) account at a brokerage), and they are sometimes referred to as Totten trusts. You name a beneficiary when you start the account, and the beneficiary would inherit assets that are left in the account after your death.
This transfer would not go through probate. In some states, you can name a beneficiary when you register your motor vehicle, but this is not offered in Kentucky and North Carolina.
Your individual retirement account will be transferred to a beneficiary after your death if you have made a beneficiary designation, and probate would not be an issue.
Revocable Living Trust
Another probate avoidance tool is a living trust. A revocable living trust is a versatile estate planning tool that is the right choice for many people, and you do not have to be wealthy to take advantage of the benefits. You don’t have to be concerned about losing access to the assets because you would act as the trustee during your life.
After your death, the successor trustee you designate would follow the instructions that you leave with regard to asset distributions. Your wishes would be carried out, and the administration of a living trust is not subject to probate.
This is one of the advantages that living trusts provide, but there are others that we will examine at another time.
Schedule a Consultation!
As you can see, you have choices to make when you are planning your estate, and there is no one-size-fits-all approach. When you choose our firm, we will work with you to develop a personalized plan that is perfect for you and your family.
You can set up a consultation at our Charlotte, NC or Huntersville, NC estate planning office if you call us at 704-944-3245. The number for our Ashland, Kentucky location is 606-324-5516, and the number for our Florence, KY location is 859-372-6655. You can also use our contact form if you would prefer to send us a message.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
- What You Need to Know about the Medicaid Look-Back Rule - January 3, 2023
- How to Pass Down Your Legacy in Your Estate Plan - October 3, 2022
- Practical Steps to Take after Receiving a Terminal Diagnosis - September 30, 2022
