Recommendations to Avoid Probate

Recommendations to Avoid Probate

The probate process when someone dies varies from state to state. 

There are many objections that people have against the present probate process.  One objection that people have is that the process can be quite lengthy, taking anywhere from six months to several years, and it can be very expensive, costing anywhere from 2 to 5 percent of the estate.  Two other objections are that the will becomes public, and the amounts in the estate also become public. 

Going through probate, the will does indeed become public and if anyone wants to look at it, they can.  However, the alternate of the will, the trust document, can also become a public document should anyone decide to bring a court action challenging the trust.

The information on the assets of an estate need not become public if the heirs and beneficiaries are all adults, competent, and happy with the current administration of the estate.  In this case, the involved parties can just sign a receipt and release, approving the executor's accounts.  In some states, the executor does not have to automatically file a list of estate assets.  This is not the case if there is a minor beneficiary or one who is incompetent.  Also, if one or more of the beneficiaries is dissatisfied with the process in some way, the documents of the case would become a matter of public record, whether or not a will or trust had been used.

One good idea for avoiding probate for someone in bad health is to set up a "lifetime revocable trust."  You would first transfer all assets into the trust and appoint a trustee to handle the account.  If needed, a power of attorney can be given so that the attorney-in-fact can transfer the funds.  At the time of death, a "pour over" will transfer any property not already in the trust to the trust.

Other ways to avoid probate are joint property ownership, retirement, and life insurance policies.  Any piece of property that is jointly owned will pass ownership from two people to the surviving person should one owner die.  Life insurance policies and retirement pensions usually have a named beneficiary and therefore would pass directly to them upon the death of the policy holder.  All of these types of accounts avoid the probate process and remained unaffected by the wishes of the will, unless you make your beneficiary "my estate."

Even if you manage to avoid most of the costs of probate, you cannot completely avoid state and federal inheritance and estate taxes.  These taxes apply to property that goes through the probate process and property that does not.  Avoiding probate does not mean avoiding estate taxes, unless you give the assets or property away, and then you will still have to pay gift taxes on that property.

Probate can be nothing to worry about.  However the non-probate property can sometimes ruin an otherwise good estate plan.  It is vitally important that you consult a trained estate planning attorney or other financial specialist when setting up your trust account.