Why Avoid Probate?
What is Probate?
Probate refers to the court-supervised process of settling a deceased person's estate and distributing their property to heirs. Every will undergoes probate, though the specific procedures differ across jurisdictions. Generally, to initiate probate, the will is filed with the probate court, which appoints a personal representative to manage the estate's affairs. The responsibilities of the personal representative include:
Paying estate debts, taxes, and fees
Collecting the decedent's assets
Distributing the assets to heirs in accordance with the will
Why Avoid Probate?
There are two primary reasons for wanting to avoid probate: the time and money involved in the process. Since probate is a court procedure, it can take months or even years to gather assets and settle estate debts.
Why is this Important?
Probate delay can affect the heirs significantly. During the probate process, they won't receive any inheritance. The duration of probate can be extended if the will or its provisions are contested.
In addition to the lengthy process, there are also costs associated with settling an estate. The court takes a portion of the estate's value to cover probate fees, and hiring a probate attorney can add even more expenses, which further diminishes the heirs' inheritance.
Another reason to consider avoiding probate is the desire for privacy. Since probate is a public process, all proceedings become part of the public record, allowing anyone to search for and find details about the distribution of an estate's assets, including their value and beneficiaries.
How to Avoid Probate
As demonstrated, avoiding probate is often advantageous, and the best way to achieve this is to ensure that your assets pass directly to your heirs. There are several methods to accomplish this, with one of the simplest being the creation of a living trust.
In a living trust, the grantor (the individual establishing the trust) funds it by placing chosen assets into it while retaining control until their death. The grantor also designates a successor trustee, who will distribute the trust property according to the grantor's wishes after their passing.
Note that probate is not involved in this process, as everything occurs without the need for the probate court or its laws.
Other Ways to Avoid Probate Include:
Holding property jointly so that the surviving owner gains full ownership upon death (e.g., joint tenancy with rights of survivorship, tenancy by the entirety, community property in community property states)
Designating beneficiaries on life insurance and retirement accounts, allowing benefits to pass directly upon death
Naming beneficiaries on pay-on-death (POD) bank accounts or transfer-on-death (TOD) investment accounts.
