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How to Avoid Probate? Estate Planning Guide


Probating an estate is an expensive, time-consuming and sometimes adversarial affair. It is possible, and sometimes advisable, to avoid probate. With the help of an estate planner and, perhaps, an attorney, you can learn how to avoid probate for your estate. Remember, too, that estate laws vary by states and even jurisdictions. Estate planning is best done with the insight and guidance of a financial advisor.

Probate and Why You Should Avoid It

Probate is the court procedure of proving a will after someone (the decedent) who has completed his or her last will and testament dies. If you have a will and pass away, you have passed away testate or with a will. Probate is also the process of settling the estate of someone who dies without a will (intestate). Probate may be long and complicated if the estate is large and there are many beneficiaries. It can also be very expensive if attorneys, as well as an executor, is involved. The executor is the administrator of the will as named by the individual in the will.

The executor of your estate will inventory all your assets and liabilities. They will determine what goes to who after completing the inventory and following your advice in your will. The executor makes sure all creditors are satisfied. Then your assets are distributed to your heirs and the judge rules that the estate is settled. Also, during the probate process, someone can contest or challenge your will.

Is it advisable to try to avoid probate? Most would say yes primarily for these reasons:

  • Time – Probating an estate is an endeavor that takes time. The executor, after they are approved by the court, has to find all the creditors, inventory all assets and perform a host of other administrative jobs. Probate can certainly take months and, in some cases, years. During that time, the beneficiaries or heirs do not inherit.
  • Money – Probate can also be an expensive process. There are court costs involved. The executor may need to be paid for the time they spend on the various tasks associated with probate. If there are any problems or if the executor thinks it is best, a probate attorney may need to be hired. All of these actions can be expensive especially hiring the probate attorney since that one expense can take a huge chunk out of the estate. Bank accounts and investments are frozen until probate is concluded, which may mean someone else has to pay for funeral costs.
  • Privacy – If an estate has been probated, the records become part of the public record. The public can see the assets that were involved, who the beneficiaries were and what they inherited.

How to Avoid Probate

Probate court hearing form

If you want to avoid probate, it requires some planning. One thing to plan for is how much you’re willing to spend to avoid probate. Some options may end up costing you more than the expense of a will. While you can do most or all of the work yourself, it’s wise to involve an attorney, if only for advice. Here are six things you can do to avoid probate:

  • Joint ownership of property – You can jointly own property. On the deed to the property (usually real estate), you state how you want that property to be held. Choices are joint tenancy with the right of survivorship, which means that if one owner dies, the other takes ownership without the need for probate. Another possibility is joint tenancy by entirety which is used by married couples and in some states, domestic partners. A third possibility is tenancy in common. A fourth is community property with the right of survivorship. This fourth option is only available in states that recognize domestic partners and the partners live or own property in Alaska, Arizona, California, Idaho, Nevada, Texas or Wisconsin.
  • Name beneficiaries on all possible accounts and property – This may seem like it would be automatic, but it is important to be sure there are the beneficiaries you want on your life insurance policies, financial accounts both at a bank and through a securities brokerage, pension plans, 401(k) plans, 403(b) plans, IRA accounts and other investments.
  • Pay-on-death accounts and registrations – You can convert your retirement accounts and bank accounts to “pay-on-death” accounts by signing a beneficiary form. You can also convert your security accounts and your vehicle registrations, in most states. More than half of the states also allow “transfer-on-death” real estate deeds.
  • Transfer-on-death for securities and vehicle registrations – For your securities accounts, you can sign a form authorizing a “beneficiary on death.” This means that the beneficiary can only take ownership after your death or transfer-on-death. Probate will not be involved. They will only have to show identification and a death certificate. In about half of the states, you can do the same for vehicles.
  • Write a revocable living trust – If you are thinking of setting up a trust to avoid probate, you want to consider the positives and negatives of a revocable living trust carefully. First is the cost. If you have an average estate, probate may cost between $1,500 – $2,500 depending on where you live. A living trust has to be maintained over your lifetime and chances are, you will need an attorney to maintain it. In this case, your cost will be quite a bit higher than if you go through probate. On the positive side, revocable living trusts were developed to help avoid probate. Your property is held in trust for you and does not enter into any probate proceeding upon your death. This is because the trustee owns the property, not you individually. The trust document is like a will. You specify who you want to inherit and the trust property (your estate) is transferred to them upon your death.
  • Gifts – Giving gifts to your desired heirs before your death is another way to avoid probate as long as you do not exceed the federal guidelines regarding the value of gifts you can give. Gifts over $15,000 in value per year to the same recipient are subject to tax. Anything below that is not and that allows for substantial estate tax savings if you are subject to estate tax. As long as your spouse is a U.S. citizen, you can give them whatever amount in gifts you like with no limits and no tax.

The Bottom Line

Happy Chinese family

It is often wise from a financial perspective to avoid probate if possible. It will also save grieving beneficiaries and heirs a lot of time and stress. It’s important that, while you are doing your estate planning, you consult with an attorney or financial planner to find out how best to accomplish your goals within your state. While many things are the same across state lines, other important issues are different.

Tips on Estate Planning

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