Let’s start with the bad news first, when a person passes away, their entire estate (i.e., their assets, cash, and property) must go through probate. Probate is defined as the court-supervised process of distributing a deceased person’s assets. The estate can be subject to several costs and fees, including but not limited to attorney’s fees, administrators, appraisers, accounting professionals, courts, and state law. Depending upon how complex the person’s estate is, probate can easily exceed $10,000.
The bright side: a number of probate expenses can be minimized or eliminated altogether, with just a little estate planning by an experienced trust and estate attorney.
Below are three easy way to minimize or eliminate probate costs altogether:
- Designate a Beneficiary. Your estate is required to go through your state’s probate process if you have accounts, property, or other assets solely in your name when you pass away. However, if you designate a beneficiary, your property, accounts, and other assets will automatically be transferred to your named beneficiary when you pass away without any court intervention. Subject to your state’s laws, common assets that may be transferred by designating a beneficiary, include but are not limited to:
- Life insurance
- Real estate
- Retirement plans
A Word of Caution: When an individual is designated as a beneficiary to a property or an account, they will receive the asset(s) outright, subject to any claims asserted by their creditors.
- Joint Ownership with Right of Survivorship. If you own property jointly with another person, and the person has the right of survivorship, you can avoid the probate process altogether. Specifically, the legal effect of joint ownership is that assets are automatically transferred to the co-owner at your death.
There are a few ways that you can create joint ownership, which include the following:
- Community property – for states that apply the legal doctrine of community property, any property and assets obtained during the marriage is categorized as community property and will pass to your spouse/joint owner when you pass away.
- Joint tenancy with the right of survivorship – you can make this designation on your property or assets, and ownership will be transferred to the other tenants when you pass away.
- Tenancy by its entirety – In states that recognize this legal doctrine, it is virtually identical to joint tenancy with a right of survivorship. However, the distinction is that this form of ownership is exclusively for married couples.
Keep in mind that state laws will govern which form of ownership is best for your situation. Our firm can advise if any one of these forms of joint ownership is good for your estate planning goals and strategy.
A Word of Caution: Just like when you add a beneficiary designation to your assets, when you add a joint owner to your property or other accounts, the property or accounts become subject to the joint owners’ creditors if they assert any claims. Keep in mind that the property or account becomes subject to the creditor’s claims immediately when the joint owner’s name is added. This means that the new owner’s creditors could potentially seize your property or assets while you are still alive.
- Create and Fund a Revocable Living Trust. Sit down with a competent attorney and create a Revocable Living Trust (RLT). Once legally created, you can transfer your property into the RLT and convey ownership of the property into the trust’s name. By doing it this way, you still retain control over all legal decisions of your property as the trustee of the trust until you pass away. As the beneficiary, you likewise enjoy the accounts and property during your lifetime. When you pass away, your designated successor trustee will manage, transfer, and/or distribute your assets according to your final wishes. An RLT is a great option, as long as it’s created and funded by an experienced and competent estate planning attorney.
We Can Help You Today!
If you have an estate planning question or are interested in finding out more information about how your heirs and beneficiaries can avoid probate when you pass away, contact our office to schedule your free consultation today.
As an extra convenience, especially amid the COVID-19 health pandemic, our office is available to consult with clients via phone or video conferencing as an alternative to in-person meetings. Overall, we are here to advise and guide you on probate avoidance and whether these strategies are appropriate for your estate plan.
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