The probate process can be expensive and time-consuming. Learn 4 ways you can structure your assets to keep your estate (and loved ones) out of probate court.
What Is Probate?
Probate is the court process of transferring your assets after your death to your beneficiaries. Under the supervision of a judge, the probate court will validate your last will and testament, approve your executor, and ensure your assets are distributed properly and that any applicable taxes are paid.
Many people think that a last will and testament will protect them from the probate process but that is not true—all wills go through probate court. And while there are many reasons one might want to avoid this process, there are also ways to avoid this lengthy and costly process. Here are 4 reasons to avoid probate and proven tips from an estate planning attorney to help you circumvent this process (that can sometimes take years to resolve).
4 Reasons To Avoid Probate
Assets will be frozen. Frozen assets might throw a wrench into delicate or time-sensitive situations where access to funds is necessary for important financial decisions. One example is planning and paying for your funeral. If you did not set funds aside and there is no transfer on death (TOD) designation or joint ownership on a bank account your loved ones will not be able to access funds to pay for costs associated with your funeral.
The probate process can be slow. The probate process can take anywhere from six months to more than two years. Certain benchmarks have to be met before the next step is started: The executor must be approved, debts must be settled, taxes paid, beneficiaries named, and assets distributed. If there are any objections this can stall the process and your estate will incur additional attorney fees.
The process can be expensive. It is not uncommon for attorney costs, executor fees, filing fees, and administrative fees to cost nearly 10% of the gross estate. This can add up quickly if the probate process is drawn out or challenged. If you want to avoid giving a major chunk of change to the government after your death, avoiding a lengthy probate process is your best bet.
Probate proceedings become public records. If you are a private person you might want to keep that privacy after your death. Probate court becomes a public record and all of the details surrounding your assets and debts will be shared.
4 Ways to Prevent Your Estate From Probate
Establish a Revocable Living Trust: Assets in a trust do not get frozen, but the same can not be said for a will. A last will and testament is a great document to lay out your wishes but it does very little to protect your loved ones from the arduous probate process. To avoid this costly avenue, consider setting up a revocable living trust where your assets are held in a trust account where you can function as the trustee until your death. A revocable trust will shift to an irrevocable trust after your death and your estate will be taxed and then distributed to your heirs. In most states, the process and documents of transferring the trust are private and none of the information is publicly filed. Unlike probate court, you, your estate, and your heirs will be able to maintain a level of privacy. The only way to protect your estate from the cost of probating a will is to create a living trust.
Designate Beneficiaries: Designating a Beneficiary on your bank accounts, retirement accounts, annuities, and life insurance policies is an easy task with minimal paperwork. Many companies require the paperwork as part of setting up your account. This designation is unique to each asset so if someone chooses this route they will have to file paperwork with each entity holding the asset. After your death, the beneficiary will receive the assets as an inheritance. One important note is that the beneficiary designation will override anything laid out in a last will and testament.
Hold Property Jointly: If you are married there is a good chance any property acquired during your marriage is already jointly held with your spouse. Upon your death, your spouse will become the sole owner of the property. It is still a good idea to have larger assets like property, land, fine art, and family heirlooms in a trust and not rely solely on jointly-held property. If something happens to both parties at the same time, like a car accident, then the jointly held property is still in a trust and will avoid probate as it passes to your heirs.
Gifting Your Estate Before Death: One option to avoid probate court is to give portions of your estate before your death. One of the pros of going this route is that you get to experience the joy and excitement of giving your family gifts and being able to see them receive the gift. Without a trust, your estate could end up in probate court, and everything from money and family heirlooms to property could be put through the probate process which is both expensive and time-consuming.
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The process of getting a legitimate will in place for you and your family can be overwhelming, confusing, and costly, but it doesn’t have to be! At Assurest, we offer simple, affordable solutions for your legal needs and make the process easy by coming to you for the conversation—meeting you in your home or, if you prefer, virtually or over the phone.
Serving the Greater Richmond area and beyond, our experienced and trustworthy professionals simplify the process using clear, understandable language free of legal jargon and provide flat-rate packages, so you’re never surprised by the bill. Contact us today and rest assured that your affairs are in order and your loved ones are protected.
Disclaimer: This material is intended for general information purposes only and does not constitute legal advice. Responses to inquiries, whether by email, telephone, or other means, do not constitute legal advice, nor do they create or imply the existence of an attorney-client relationship.