Looking for ways to avoid probate? Making sure that your loved ones won’t need to go through the probate process saves you a great deal of money, keeps family matters private, and speeds up asset transfers. Whether you are preparing your estate plan or have already established a will or trust for your intended beneficiaries, below are certain guidelines that can lead to avoiding probate when the time comes.
There are different ways to avoid probate and which one works best depends on your circumstances and which stage you are in terms of estate planning. If you have not yet established a trust or a will, seek the help of an experienced estate planning attorney.
Probate Controls Property Distribution
During probate, the court manages the distribution of a decedent’s estate or properties. When you die without a will, the probate court is authorized to decide on how to distribute assets to your surviving next of kin in line with your state’s probate laws. More specifically, a court-appointed representative will manage your heritage, check if you have any outstanding debts, pay back your creditors, and then distribute all remaining property to your family members.
If, on the other hand, there was a will, then soon after death, all properties will be transferred in line with the manner specified in the last will and testament. However, having a will does not stop probate from happening.
Avoiding Probate for Financial and Security Reasons
Many estate planners want to evade probate because of associated costs such as filing fees or publication charges and to avoid making the owner’s finances placed on the public record. This means that anyone can see the total worth of the estate, any remaining debts, and the appointed beneficiary or heir.
Here are some guidelines you can follow during your estate planning that helps in avoiding probate. Choose the method that best fits your scenario.
Property Transfers. When you give away your property before you die, those will be considered as “gifts”. This is commonly included in an estate plan since the only drawback is that you will no longer be able to live in or use the property while you live. The best scenario is that you give it to a person who you intend to benefit from your estate in the future. Gifting property helps you avoid paying federal taxes as long as it does not exceed a certain amount.
Real Estate Joint Ownerships. Any property owned by more than one person will avoid probate as long as one of the owners survives. The property title will automatically be transferred to the remaining owner. You can choose to have a joint tenancy (with survivorship rights), tenancy by entireties (for married couples), tenancy in common. Of these three, only the last one will require probate since the joint owner’s interest will be examined by a probate judge before passing it to his or her heirs. A potential drawback is that a portion of the deceased owner’s asset may be subject to estate tax, and if the property value exceeds certain exemptions, it may even be considered for federal gift tax.
Joint Ownership of Property. If you own a motor vehicle, boat, or other valuable assets, you can create a title document to declare ownership similar to real estate. Any property held jointly will automatically be transferred to the surviving co-owner at the time of death, as long as there are survivorship rights.
Pay-On-Death Accounts. Unlike joint ownerships where the beneficiary can use your property while you live, PODs only give ownership rights when the owner dies. This means that when you create a bank account, you can designate your beneficiary, beneficiaries, or a successor beneficiary. All remaining funds will then be transferred to that person on your death.
Transfer-on-Death.Aside from financial accounts, you can also transfer stocks, securities, bonds, real estate, or even motor vehicles upon death. Make sure to check if your state allows such transfers. Having a TOD beneficiary designation is permitted but requires a transfer-on-death deed for the following states: Alaska, Arizona, Arkansas, Colorado, the District of Columbia, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Living Trusts. If you haven’t established one, creating a living trust is recommended for owners with a large estate, especially when there are many intended recipients. A revocable living trust, in particular, helps you avoid probate. When you create a revocable living trust, you are transferring the title to trust and you act as the trustee. This means you still have full control over the property as long as you live. You may also opt to have an irrevocable living trust as it also does not require probate but the downside is that you won’t be able to revoke it and you will lose your rights over the property. Once you pass away, the designated successor trustee will oversee that the transfer will be successful.
Create a Will.Although this will not prevent going through probate courts, wills can help minimize probate costs. When you have properties having a large value, avoiding probate is difficult and having a will is the better option.
Do you need estate planning advice? Talk to our experienced estate planning lawyers.
Remember, while these guidelines have been used by other estate owners, there are potential roadblocks that can complicate your plan when your circumstances do not fit the plan you chose. Having an estate planning lawyer by your side can help you spot those potential complications and find a way to circumvent these. If you need estate planning advice, or if you are wondering whether your family will go through probate. Ask our estate planning attorneys from James A. Jones. Our Tacoma estate lawyers will make sure that your family, assets, and wealth are protected.