If you start to hear bits and pieces about the estate planning process, you will invariably run into the concept of probate. Most people have had no exposure to it so there are invariably going to be questions. We will try to answer some of them in this post.
Legal Process of Estate Administration
Probate can be succinctly defined as the legal process of estate administration. If you die while you are in possession of property that is going to be transferred through the terms of a will, the document would be admitted to probate. The executor would take care of the hands-on tasks, and the probate court would serve as a supervisory entity.
There is one caveat to the above statement. In some states, it is possible to claim the property of a small estate with a simple affidavit. The ability to do this is limited, though. For example, in the state of North Carolina, one of the states where we practice, this option only applies to certain small estates valued at $20,000 or less.
When someone dies without any estate planning documents at all, the court would appoint a personal representative and supervise the estate administration process. After final debts are paid, the court would order the distribution of the assets under the intestate succession laws of the state.
Transfers Outside of Probate
Some types of transfers take place outside of probate. If you have a beneficiary for your individual retirement account or 401(k), the transfer would not be subject to the probate process.
When you open up an account at a bank or a brokerage, you have the option of adding a beneficiary. This is called a payable on death or transfer on death account, and these accounts are sometimes referred to as Totten trusts.
The beneficiary would not be able to touch the funds while you are still alive. After your passing, the financial institution would transfer the assets that remain in the account to your beneficiary after receiving the death certificate.
Another type of transfer that would not be subject to probate is a property exchange through joint tenancy with right of survivorship. If you own a home, you can add someone to the title or deed. This person would generally immediately own half of the property. After your death, the surviving joint tenant would assume total ownership of the property that was held in joint tenancy.
The probate court would not be involved, and this is a positive. However, this is a risky course of action because of the fact that you would be divesting yourself of partial ownership immediately. If the joint tenant became the target of a lawsuit or a tax lien, that portion of the property could be attached.
If you have insurance policies on your life, the companies would pay the beneficiaries as long as you die under circumstances that were covered in the contract. Probate would not be a factor.
This is a list of the most common types of transfers that naturally take place free of the probate process. If you choose to do so, you can proactively implement additional strategies to avoid probate, and there are some good reasons to exercise this option. We will explain them in a future blog post, so stay tuned.
Attend a Free Seminar
Our attorneys are holding a series of estate planning seminars in the near future, and we are excited about the material that will be presented. You can learn everything you need to know about the subject in a relatively brief period of time if you attend one of these sessions.
There is no admission charge at all, but we ask that you register in advance so that we can reserve your seat. You can visit our seminar schedule page to see the dates and obtain registration information.
Schedule a Consultation Right Now!
If you are ready to take direct action, our doors are open. You can send us a message to request a consultation appointment, and you can get in touch with us by phone at 704-944-3245 (Charlotte, NC or Huntersville, NC), or for individuals in Kentucky, at 606-324-5516 (Ashland, KY) or 859-372-6655 (Florence, KY).