Probate is a legal process that is sometimes necessary when assets are being distributed after someone dies. There are those that try to avoid probate when they understand some things about it, and we will explore the subject in this post.
Court Supervised Proceeding
Most people assume that a will is the asset transfer vehicle to use unless you are a multimillionaire. If you accept this premise and utilize a will, you would name an executor to act as the administrator after your death.
The executor would be required to admit the will to probate, and everything would be placed on hold. During probate, the executor must notify the decedent’s creditors, and they are given a chance to come forward seeking payment.
There is a proving of the will during probate. The court will make sure that the document is in fact valid, and interested parties can contest the terms while the estate is being probated.
When someone dies intestate or without a will or trust, this court will provide supervision. They will name a personal representative to act as the administrator, and the assets will be distributed under the intestate succession laws after debts are paid.
What’s the Problem?
All of the above sounds pretty harmless, and it is, but it is less than ideal for the rightful inheritors.
They have to wait for about eight months at minimum to receive their bequests, and more complicated cases can be stalled in probate for longer periods of time. Most people would like their loved ones to receive their inheritances in a timely manner.
The costs that accumulate during probate include a filing fee, the executor’s payment, potential legal and accounting fees, appraisal charges, and liquidation expenses.
You probably want your final affairs to be conducted confidentially, and this is especially true if you made some decisions that would be unpopular with someone. Probate records are available to anyone that wants to access them, so there is a loss of privacy.
Transfers Outside of Probate
Some postmortem transfers will take place outside of probate even if you are not intentionally trying to avoid it. The transfer of to an individual retirement account beneficiary is not subject to probate, and this also applies to life insurance proceeds.
When you open an account at a bank or a brokerage, you can name a beneficiary, or multiple beneficiaries. This is a payable on death or transfer on death account, and the probate court is not involved when the transfer is taking place.
If you own property, you can create a joint tenancy, which comes with right of survivorship. You would be making someone else a co-owner of the property, and the surviving joint tenant would inherit the deceased tenant’s interest in the property outside of probate.
Proactive Probate Avoidance
You can utilize a revocable living trust as the centerpiece of your estate plan instead of a simple will. If you go in this direction, you would be the trustee while you are alive, so you would maintain complete control of the assets in the trust.
When you are drawing up the trust, you name a successor trustee to step into the role after your passing, and your heirs would be named as the beneficiaries. The trustee would distribute assets to the beneficiaries outside of probate after you are gone.
This is just one of the benefits that a living trust can provide. When you learn about all of them, you may decide that a living trust is right for you, and they are very widely utilized.
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