If you’ve been reading our blogs for a while, you’ve seen us mention “probate” — often along with the terms avoid, prevent, or stay away from. While probate is a valuable legal tool, if estate plans aren’t clear or there is a dispute, it’s better to work with an attorney to devise a plan that avoids it. It can be lengthy, and the decisions that come from the process are out of your and your loved one’s control. It can also be costly, with attorney fees, appraisers fees, and other expenses that can add up quickly. Instead, follow these steps to ensure your loved ones, and your estate, avoid probate.
Have a Will & Name Beneficiaries
The most straightforward way to avoid probate is to make it legally known what you want to be done with your assets when you die. A Will is a document that outlines precisely this. While it does not prevent property from going into probate, it significantly speeds up the process. In the same vein, name beneficiaries for all financial accounts and other assets that allow you to – like retirement accounts, pension plans, insurance plans, and more. Upon your death, these assets will automatically pass to the named beneficiary — if you don’t name anyone, the accounts may go into probate.
Have a Trust
At its most basic definition, a Trust is a legal structure in which a person manages or holds an asset to benefit another person. The one who holds the property is called a Trustee, whereas the person (or entity) who is benefitting is called a beneficiary. There is also a third party involved — the person who initially creates and funds the Trust, often referred to as a trustor or Grantor. Trusts are a more specific, private way to enumerate the distribution of assets. Whereas Wills only go into effect after a person dies, a Trust can become active at any time, even as soon as it’s created by the trustor and the Trustee.
The assets in a Trust can also be controlled, unlike a Will in which the assets pass immediately to the beneficiary and become their property in full. A trustor or grantor can structure a Trust to be paid out in portions over time or to be paid out to the Trustee when they reach a certain age. There are also more nuances that can be defined in a Trust, such as assets and distribution between different family members and entities based on situations — marriage, death, divorce, etc. You can read more about Trusts here, but in summary, they keep assets out of probate.
There are many different kinds of trusts, and an estate planning attorney well-versed in estate planning can help you determine which kind(s) is right for your situation.
While there are some federal and state tax limits on what and how much you can give to friends and family each year, if you start planning early, you can begin to distribute your assets before your death. When you die, the assets are no longer yours and, therefore, cannot be the subject of probate. While this can be straightforward, once property or money is gifted, it is entirely out of your hands — for example, if you give someone a house, it is then theirs to do with what they choose, which could mean selling it, renting it out, or changing it. If you don’t wish to hand over control in that way, consider a Trust instead.
Hold Property Jointly
Many different types of property can be held jointly — that is, more than one person can be on the deed or title. Boats, cars, houses, equity accounts, and other assets can all have joint owners. If one of the owners dies, the title or deed automatically transfers in its entirety to the surviving party, avoiding probate. Many people use this strategy for things like houses, where they want their spouse to be able to maintain ownership of their joint home in the event that one of them dies. When taking this route, be sure to designate the ownership clearly and be certain that the person with whom you jointly own the property is someone you trust. Because they are also a joint owner, they have rights over the property even before you die, so if you wanted to sell that property, they would also have to consent.
All in all, a solid estate plan will help your loved ones avoid probate in the event of your passing. When someone dies, it’s emotionally difficult enough, and by working with a knowledgeable estate planning attorney from McCarthy Law, LLC, you can help support those loved ones with a simplified process that avoids lengthy and possibly expensive probate.