Probate is a legal process that an estate must pass through under certain circumstances. When a will is used as the asset transfer vehicle, it would be admitted to probate, and the court would supervise the administration process.
The same thing is true with someone passes away without any estate planning documents at all. When this happens, the court would appoint a personal representative to act as the administrator.
It is possible to proactively implement a probate avoidance strategy, and people often do so, because probate comes with some drawbacks. This process will take eight or nine months to a year to run its course at minimum, and often no inheritances are distributed during this interim.
The time lag is one negative, and the process can be rather expensive. There will be court costs, legal fees, the remuneration that is paid to the executor, appraisal expenses, liquidation fees, and miscellaneous expenditures. At the end of the day, this red ink will reduce the amount of the inheritances that will eventually be distributed to the heirs.
Another probate pitfall is the loss of privacy. Interested parties can access probate records to find out how the assets were distributed. This can potentially cause acrimony among people that were close to the decedent in one way or another.
A revocable living trust is a commonly utilized probate avoidance tool. Assets that been conveyed into this type of trust could be distributed by the trustee outside of probate.
There are some other types of asset transfers that would not be subject to the probate process, and we will give you a rundown here.
Transfers to IRA Beneficiaries
Generally speaking, if you have an individual retirement account, the transfer to the beneficiary would take place outside of probate. However, it is important to keep your beneficiary designations up to date so that there are no snags.
Payable on Death Accounts
When you open up an account at a bank or a brokerage, you can make it a payable on death or transfer on death account. You would name a beneficiary, and this individual would not have access to the funds while you are living.
After your death, the beneficiary would present a death certificate to the institution, and they would then assume ownership of assets that remain in the account. It is possible to name multiple beneficiaries, but you may be required to allow for equal distributions to each of them.
Joint Tenancy With Right of Survivorship
If you own real property, you could add a co-owner to the title or deed. This would create the condition of joint tenancy. It comes with right of survivorship, so the person that you add to the ownership document would assume total ownership of the property after your death. This would be a probate-free transfer.
Life Insurance Proceeds
When you have a life insurance policy on your life, the beneficiary or beneficiaries would be paid directly by the company as long as the contractual conditions were met. The court would not be involved in this transfer.
Get Sound Advice
It is not wise to look at these asset transfer methods and patch them together to implement your own estate plan. We have shared some facts, but there are drawbacks and limitations when you use these methods. You would do well to seek professional advice before you make any decisions.
Attend a Free Webinar
While our ordinary lives are disrupted by the coronavirus, our firm has adapted to provide our services in a safe but equally effective manner. We routinely hold workshops to provide information to our neighbors free of charge, and we have not abandoned that policy.
Fortunately, technology enables us to present webinars, and so this is an option that is available to you these days. You can visit our workshop schedule page to see the dates and obtain all the information you need to gain access.
We Are Here to Help!
If you know that you are ready to put an estate plan in place, we can accommodate you during these difficult times. We are offering remote consultations over the phone or through teleconferencing, so we are here whenever you need us.
You can give us a call at 585-374-5210 to schedule a consultation, and you can alternately send us a message through our contact page if you would rather reach out electronically.
- Business Succession Planning May Be Easier than You Think - June 1, 2022
- Estate Planning – Something You Shouldn’t Do Yourself - May 18, 2022
- Just When You Thought You Understood the 10-Year Rule, Think Again - May 11, 2022
