How to Avoid or Reduce the Impact of Probate on Your Estate

When an individual passes, the probate process is set into motion. This process involves settling the affairs of the decedent, regardless of whether there is a will or not. Because there are a number of steps involved, they can often be time-consuming and costly though that depends on the nature of the estate.

You can reduce the complexity of probate or even avoid it entirely through efficient estate planning. Engaging in estate planning may determine how quickly and how much your beneficiaries may receive of your assets. Generally, the simpler the estate, the less involved the probate process will be. If an estate is substantial and has a wide range of assets, it makes more sense to limit or avoid probate. The value of your estate and your priorities will help determine whether taking action to avoid probate will be the best course.  The goal of avoiding or limiting probate will depend on the State where you reside since probate laws vary from State to State.  For example, it is generally more important to avoid probate in Florida than in New Jersey.

The probate process involves:

  • Proving a will is genuine and actually the last will of the decedent (the person who passed)
  • Appointing an executor or state administrator
  • Addressing any challenge to the validity of the will
  • Determining what claims against the estate must be paid
  • Ensuring the remaining assets are accounted for and distributed properly in accordance with the Will or under state intestacy law when there is no Will.

Assets will be frozen until an individual is appointed either as executor (if there is a will) or administrator (if there is no will) and an estate account is created. At that time, estate assets are placed into the estate account which can be used to pay estate expenses and consolidate estate assets

Steps to limit or eliminate probate include:

  • A Revocable Living Trust — a legal tool created by a grantor that allows a trustee to care for and spend assets set aside by the grantor for the benefit of beneficiaries. Assets can stay in the trust, managed by the selected trustee. If Revocable Living Trusts are used in order to limit the scope of probate, the Trust must be “funded” with the individual’s assets prior to death.  Too often people sign Revocable Living Trusts but do not re-title their assets to be owned by the Trust.
  • Payable-on-death or transfer-on-death bank accounts — accounts that allow you to name one or more beneficiaries so funds in the accounts would transfer to that person directly when you pass and would not be part of your estate for the purposes of probate. Making these arrangements requires completing a form or two at your bank. Care should be taken to name all beneficiaries on those accounts.
  • Tax-free gifts — funds or valuables given as gifts during your lifetime that help you avoid or limit probate because you no longer own the property or monies. (Making such gifts during your lifetime may also reduce your death taxes up to certain amounts.)
  • Proceeds of life insurance policies, IRAs, 401(k) accounts, annuity contracts and other retirement accounts — funds that do not pass through probate. Make sure your designation of beneficiaries is up to date (especially if you’re divorced or your relationship to the individual who passed has ended) and that you have alternate beneficiaries in the event the current designated individual pre-deceases you.
  • Joint tenancy with right of survivorship, tenancy by the entirety with right of survivorship — different types of joint ownership that allow your property to bypass the probate process. Examples of these may include equity accounts, vehicles, homes and bank accounts that may can be jointly owned with the person whom you would like to inherit these assets upon your passing. In these instances, the title of the property automatically passes to the joint survivor upon your death.

Should you have questions about estate planning or probate, whether your assets are simple or substantial, contact our office today. We can help you plan and prepare.

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