Use Estate Planning and Avoid Probate
When a person dies, his or her assets are disbursed in accordance to his or her will or in accordance with the state’s intestate succession laws. Either process can occur through probate, which is essentially the legal process by which a decedent’s (person who has died) assets and debts are paid and distributed.
The probate process can take several months, or years, depending on the size of the decedent’s estate and other factors. There are also fees that must be paid. For example, a Petition for Probate costs $150.00, public notices to creditors can cost $50.00 and then there are probate court fees that depend on the size of the estate. For an estate that is worth $100,000.00, probate court fees are over $350.00. One way to avoid or reduce probate is to take some of the below estate planning steps:
1. Set up a revocable trust. A trust is a legal creation where the property of a settlor (creator of the trust) transfers her or his property to the trust with specific instructions in how the property is to be used and/or distributed. The property is then held by the trust and administered by the trustee in accordance with the specific instructions and for the benefit of beneficiaries. A revocable trust is a trust which can be terminated or modified at any time by the settlor. Since property placed in the trust is no longer owned by the settlor/decedent, it is not subject to probate.
2. Make gifts before death. The decedent’s property cannot be probated if it was given away before the decedent’s death. Keep in mind that gifts of a certain value may be taxable.
3. Set up payable-on-death or transfer-on-death accounts. Bank accounts, retirement accounts, brokerage accounts, etc. have options where upon the death of the account owner, the account will automatically transfer to the named beneficiary.
4. Create joint ownership of property. Certain property, such as real estate, may be jointly owned such that upon the death of one of the owners, the other owner(s) will take the decedent’s ownership share of the property. Types of joint ownership include: joint tenancy with right of survivorship and tenancy by the entirety.
Keep in mind: every situation is different, and a specific set of facts may make one method of estate planning more advisable than another. There are even situations where avoiding probate may not be the best idea. For more information about whether estate planning to avoid probate is right for you, please contact us.