A Google search of estate planning topics will likely turn up some resources on how to avoid probate. To the casual observer, the reasons for avoiding probate may not seem clear, further, what probate “is” or “entails” may be vague, as well. Most of us have likely seen television dramas or celebrity news stories, which involve protracted court battles over the distribution of an estate. These conflicts, more often than not, are set in probate court and involve a great deal of prolonged legal intrigue. However, these cases are the exception to the rule; rather the reality of the business of probate courts mostly consists of the usually mundane business of sorting out one’s final affairs with little fanfare. If the popular culture depiction of the probate process does not provide an accurate representation what then is probate and what do probate courts do?
What is Probate?
Probate is a legal process whereby the court supervises transferring a decedent’s property after death. The probate court acts as a third party manager making certain the will’s executor carries out the testator’s wishes, follows the required procedures regarding notice and accounting and decides any challenges to how the will is being interpreted or managed by the executor.
Contrary to common perception, probate is not required to transfer property after death; in fact, many decedents’ final affairs are administered without court involvement. However, there are often circumstances involving complicated estates or contested claims, which necessitate probate. Thus, avoiding probate may be desirable as an estate-planning tool; however, in some circumstances avoiding probate may not be possible due to legal requirements, which mandate certain types of estates be submitted to the probate court for disposition. If the option of avoiding probate is available, some estate planners may find avoiding probate an attractive possibility.
Why Avoid Probate?
The two main reasons for avoiding probate relates to time and expense. Simply put, probate courts, like other courts, move at a deliberate pace. Therefore, as more time is needed to dispose of the estate, more legal costs, incur as well. In the end, time and cost ultimately detract from the value of the estate.
How to Avoid Probate?
Whether an estate enters, probate depends on how assets are structured in an estate plan. As a preliminary matter, there is not a single method by which to avoid probate, accordingly one cannot simply state in their will that the estate should not be probated. Rather, each class of estate assets have to be designated in a way that does not trigger the need for the estate to be administered by the probate court. An estate plan should be structured in a manner that exposes the least amount of assets to being administered in probate. Some estate planners may be able to shield all estate assets from probate if the estate is smaller or involves a less complex array of assets. However, the more likely strategy needed to avoid probate would involve structuring the estate so as to keep as many assets as possible under a designation to avoid probate. The following types of assets or arrangements do not require administration by a probate court.
A living trust is a legal instrument that places assets into a trust while the grantor is still living. Under this arrangement, the grantor serves as both the person establishing the trust and the trustee. Further, a successor trustee is selected to assume trustee duties upon the incapacity or death of the grantor. Upon death or incapacity of the grantor assets in the trust are transferred to designated beneficiaries by the successor trustee. While the grantor is still living, the assets placed in the trust are still accessible, and the trust arrangement can be altered to adapt to changing circumstances. As such, a living trust establishes a way for assets to be held for the benefit of others by a trustee without being placed in probate as the trust instructions provide directions for the trustee to distribute trust assets.
Real Estate Property Held in Joint Ownership
Rather than indicating in a will, that real estate should transfer to an heir or beneficiary, thereby requiring probate court involvement, the property may be titled as jointly owned by co-owners. Under this arrangement, joint ownership of assets includes the “right of survivorship,” whereby the surviving owner of the property is granted full ownership upon the death of a co-owner. Since the transfer of assets is triggered automatically through the right of survivorship, there is no need for probate court.
For estate assets involving real property, such as vehicles, securities, bank accounts and stocks and bonds these assets can be designated as transfer-on-death; whereby the testator remains the owner of the property until death and is then transferred to a designated beneficiary. Transfer of death-designated assets must be recorded like any other deed of ownership. Further, under transfer-on-death arrangements the beneficiary holds no legal title to the property until the owner’s death.
In some jurisdictions, an estate that does not meet a certain valuation threshold does not require administration by a probate court. In this type of circumstance, the representative would normally complete an affidavit to transfer the decedent’s assets to ownership of the estate or any designated heirs or beneficiaries.
Given the disincentives to avoid probate, estate planning should always consider ways in which to protect assets from exposure to the probate process not only as a way to preserve estate assets but also as a way to reduce the time and energy needed to dispose of one’s final matters.
How Can EstateBee Help You?
For more information on living trusts, read some of the other living trust articles on our website.
If you would like more information on how to avoid probate, check out our book Make Your Own Living Trust & Avoid Probate. You’ll learn all you need to know about living trusts, their advantages and disadvantages, the tax implications, the alternatives to living trusts and, of course, how to easily make your own. With detailed information, easy-to-follow instructions, helpful worksheets and all of the forms necessary, we show both individuals and couples how to avoid the otherwise inevitable delays and costs of probate by preparing a revocable living trust and using other simple probate avoidance strategies.
If you have any queries about our products or services, please feel free to contact us.