14 May How Do I Avoid Probate?
If you’re thinking about an estate plan, you may be wondering how to avoid probate, that dreaded thing that apparently we’re all supposed to avoid.
Take Notes Guys
WHAT PURPOSE DOES PROBATE HAVE?
Before I talk about avoiding probate, you should know what it is. There is a purpose to it. Probate is a legal proceeding that does a few things.
- Methodical and Transparent Process to Transfer Assets: The executor of the estate takes the assets left in the deceased person’s name, pays off valid debts and expenses, addresses taxes and then distributes assets to beneficiaries. The court process includes methods to show records to interested parties and confirm payments were made correctly. That can be helpful if beneficiaries cannot work together to address these issues.
- Validates the Will: When a will exists, the probate court confirms whether or not the will meets all the legal requirements to be recognized. Was it signed correctly? Is it the last one? Essentially, should we follow it? Keep in mind, the will itself has a very specific function, to speak to the court. That means that assets that say where they go through beneficiary designations aren’t covered by the will. Learn more about the role of and limitations of wills by getting a free video with misconceptions about estate planning delivered to your inbox.
- Setting in Place a Responsible Party: A will typically states who should be trusted to be the executor, sometimes called personal representative. Whether or not a will exists, the probate court’s main job is to get a responsible person in place to deal with assets stuck in the deceased person’s name. Importantly, they won’t have responsibility or control over assets not stuck in someone’s name, like assets that list beneficiaries. The executor has the responsibility for collecting assets left in the deceased person’s name, paying expenses, addressing claims and distributing assets to the correct beneficiaries.
Overall, probate ensures that the deceased person’s assets are distributed according to their wishes, and that any outstanding debts and taxes are paid. While probate can be a lengthy and expensive process, it serves an important legal purpose and provides a formal framework and a methodical process for resolving disputes and ensuring that assets left in the deceased person name end up where they should.
WHY SHOULD I AVOID PROBATE?
Probate has it’s upside. But that methodical process comes with downsides. Although probate serves an important legal purpose, there are several reasons why it makes sense to avoid it:
- Time: Probate can take several months or even years to complete, and that timeline is dependent on the court. This can be a burden on loved ones waiting to receive their inheritance and cause issues for assets that need immediate attention, like businesses and rental properties.
- Cost: Probate can be expensive, with fees for attorneys, court costs, and other expenses. These costs can reduce the size of your estate and potentially leave less for your beneficiaries than other alternatives.
- Privacy: Probate is public record. Often times, the financial information must be filed and in and of itself becomes public record. More and more, this information is accessible online. This means anyone can access court records and see the details of your estate, including the value of your assets and who is receiving them. This is a significant issue with the Prince Rogers Nelson Estate which I talk about in my podcast, Good Legacy.
- Complexity: The probate process can be complicated, with many legal requirements and deadlines that must be met. This can make the process impossible for your loved ones to navigate on their own and stressful and difficult in any scenario. If you don’t need the benefits a probate provides or if you have a reasonable alternative option, why make your loved ones to go through it?
- Conflict: The point of Probate is to put all the cards on a table that everyone’s invited to. That includes next of kin that aren’t included in your plan, but would be if you didn’t have one. In other words, disinherited people. Family disputes over the distribution of assets, which can strain relationships and cause unnecessary stress during an already difficult time, are far more likely in the probate process than in alternative administration.
By avoiding probate, you can potentially save your loved ones time, money, and stress, and keep your affairs private. In certain scenarios, there can be options to accomplish the transfer of assets without probate. So, how can you avoid it?
HOW DO I AVOID PROBATE?
Probate usually happens to address the transfer of assets. Keep in mind that when you die, assets will transfer in two different ways. Some assets will transfer automatically at death through things like beneficiary designations and joint ownership. The assets are saying who gets it next.
Everything else is “stuck” in the dead person’s name. That’s what makes up the probate estate. That’s what stuck in probate. We need the court to tell us what to do, which is either based on a will or based on what state law has as a back-up plan. Each state has rules about when the court has to get involved and a certain amount where the process can take place outside of court.
If you want to avoid probate, you’re looking to qualify for your stuck assets to be dealt with outside of court. How do you do that? It all depends on the kinds of assets you have, the people involved and the law in your state. Estate planning isn’t simply about legal documents.
AN EFFECTIVE ESTATE PLAN
In the years of being a probate attorney, one thing is clear. Estate planning is like any organization. You need a strategy. Can you avoid probate? If so, can you transfer assets automatically to people or do you need some administration which you can set up outside of the court process, through a trust?
That’s a strategy. Legal documents set up your strategy – your organizational system. Just like any organization, the key is that your assets have to follow your system. Usually, that means setting up automatic transfers through things like beneficiary designations to the right beneficiaries.
How Do I Avoid Probate?
Well, you need an effective estate plan – one that minimizes the legal issues to deal with. An effective estate plan has three components.
1. A strategy of how assets transfer.
2. Have effective legal documents to set up that strategy.
3. Be financially organized. Get your assets to follow the plan, which involves the automatic transfer of assets.
But most importantly, become educated. The people who understand the basics of how this works, don’t leave a mess. Those that don’t, will. Learn what you need to know to avoid a mess with Your Organized (after)Life Workshop. The Workshop is an eight-session, online, at-your-pace Workshop where I teach you what you need to know and show you what you need to do to have an effective estate plan. Learn more, watch a free video and enroll.
Jen Gumbel is an estate planning and probate attorney who wants you to understand how this works, so you can avoid a mess. She’s a good legacy evangelist and host of the podcast, Good Legacy. You can follow her on Instagram.
Get started with the workshop todayAdd To Cart