When Is Probate Necessary? | Rochester, NY Estate Planning Attorneys

Many people are not aware of the fact that the executor cannot act in a vacuum when you use a last will, because a legal process called probate will enter the picture. The executor would admit the will to probate, and the court would provide supervision during the process.

This being stated, there are certain types of asset transfers that are not subject to probate. We will take a look at them in this blog post, and we will also explain the value of a proactive probate avoidance strategy.

Simplified Probate for Small Estates

In the state of New York where we practice law, relatively small estates do not have to go through the full probate process. If the assets do not exceed $50,000 in value, excluding real estate, a simplified probate procedure can be used. This process can be consummated in a more timely manner.

Joint Tenancy

If you own your home and you want to pass it along to a loved one after you are gone, the transfer would be subject to probate if you express this intention in a last will. However, it is possible to add a co-owner to the title or deed of the property. If you do this, the condition of joint tenancy with right of survivorship would exist.

After you pass away, the surviving joint tenant would assume full ownership of the home, and the probate court would not be involved. However, before you jump at the chance, you should understand a couple of potential drawbacks.

Since the joint tenant would own half of the property as soon as you execute the document, their half would be available to creditors or the IRS if there are financial problems. Another thing to take into consideration is the fact that you would have to secure the cooperation of the other joint tenant if you ever want to sell the property.

Payable on Death Accounts

When you open an account at a bank, you have the option of adding a beneficiary to the account. This is called a payable on death or transfer on death account. Brokerages also offer this option. The beneficiary would have no access to the funds while you are living, and this is a positive.

After you are gone, the beneficiary would present the death certificate to the institution. If all of the requirements are satisfied, the beneficiary would assume ownership of assets that remain in the account.

Once again, there are some potential pitfalls to take into consideration before you decide that this is the ideal estate planning tool. You may be able to add multiple beneficiaries, but the institutions will typically require you to agree to equal distributions of the assets. This may not be consistent with your wishes.

Some people add a beneficiary to a payable on death account, and they tell this person to distribute some of the assets to other family members when the time comes. These verbal instructions are not legally binding in any way, so the beneficiary would not be compelled to follow them. Additionally, there can be adverse tax consequences to the beneficiary if they follow your instructions.

Insurance Policy Proceeds & Individual Retirement Accounts

If you have life insurance, as long as you pass away under circumstances that are covered in the policy, your beneficiary would receive the payment outside of probate. The same dynamic applies to the beneficiary of an individual retirement account.

Revocable Living Trusts

When a will is admitted to probate, the inheritors will not receive their bequests for about nine months to a year if there are no snags. That is a long time to wait for an inheritance. There are also expenses that pile up during the process, and these debits cut into the inheritances that will be received by the heirs.

Another negative is the fact that probate is a public proceeding, so probate records are available to anyone that has an interest in the way that you planned your estate.

To avoid all of these drawbacks, you could use a revocable living trust as the centerpiece of your estate plan instead of a last will. The trustee would be empowered to distribute resources to the beneficiaries in accordance with your wishes, and there would be no need for probate.

Download Our Free Estate Planning Worksheet!

We have prepared a very useful estate planning worksheet that you can use to gain a thorough understanding of the process. There is no charge for this valuable resource, and you can obtain access to your copy if you visit our worksheet download page and follow the simple instructions.