Are you concerned about the lengthy and financially burdensome probate process? Probate court proceedings can be cumbersome, often taking months
or even years to resolve, adding stress to an already difficult time for family members.
However, there are effective strategies to bypass probate and ensure a smoother transition of assets upon death.
HOW SOLELY OWNED ASSETS ARE DISTRIBUTED AFTER DEATH
Assets held solely in your name, without designated beneficiaries or joint owners, will be distributed through one of the following legal processes:
ROLE OF SURROGATE’S AND PROBATE
COURTS
These courts oversee:
• The probate and validation of Wills.
• The appointment of Executors to manage
estates with a valid Will.
• The appointment of Administrators for estates of
individuals who die without a valid Will.
• Resolving disputes related to the validity of a
Will or the administration of an estate.
THE PROBATE PROCESS: FILING, NOTIFICATION, AND APPOINTMENT OF THE EXECUTOR
Probating a Will is the first step in any estate administration. The Executor must locate the original Will to file with the court along with the Will
witnesses’ affidavits, notices of probate, and the petition for probate.
State laws require that all beneficiaries and fiduciaries named in a Will, as well as all of the distributees, be notified that the Will is being submitted to probate.
Distributees and any person who would be adversely affected by the probate of the Will are given an opportunity to appear in Court to object if they do not sign a waiver indicating consent to probate.
If no one has any objection to the Will and the court believes that the Will is valid, it will be admitted to probate and the person named therein will be appointed as Executor.
Recognizing that probate can be expensive and time-consuming, each state provides ways for a small estate to be distributed without going through the full probate process if there is no real estate. The size of the estate or the types of assets determine which procedure should be followed.
AVOID PROBATE WITH THESE FORMS OF
OWNERSHIP
The following assets do not pass through probate or estate administration. Instead, the proceeds go directly to the person named as beneficiary or joint owner of that account. Utilizing these ownership structures can streamline the distribution of your estate and provide financial benefits to your heirs. The following forms of ownership avoid probate:
1. Real Estate held as Joint Tenants with the Right of
Survivorship.
2. Tenants-by-the-Entirety (spouses).
3. Transfer on Death Deed automatically transfers real
estate upon death to the named beneficiary.
4. Life Insurance unless all beneficiaries are deceased.
5. An irrevocable or revocable intervivos trust (living trust)
is created for holding ownership of your assets during
your lifetime for the benefit of named beneficiaries and
distributing and/or managing those assets after your
death. The trust consists of the creator (also known as
the grantor), trustee, and beneficiary.
6. Corporation stock jointly owned.
7. LLC member units jointly owned.
8. Lifetime Gifts: Sign a power of attorney authorizing your
agent to make gifts during your lifetime if you are unable
to do so. With the annual federal gift tax exclusions, you
can make annual gifts without tax consequences. Giving
away assets will appreciate in value, such as real estate,
utilizes your exemptions and shifts the appreciation in
value to the next generation.
9. Uniform Transfer to Minors Act (UTMA) custodial
accounts transfer assets to minors without probate.
10. U.S. Savings Bonds with payable on death beneficiaries
or joint ownership.
11. IRAs/401(k)s: Direct beneficiaries avoid probate.
12. Investment Accounts designated as Transfer on Death.
13. Bank Accounts Joint designated as Payable on Death,
Transfer on Death, and in Trust.
14. Annuities.
15. Life Estate.
16. Automobiles: Some states allow family members to
transfer vehicles up to a certain value directly through
the DMV.
CONCLUSION
Avoiding probate can significantly benefit your estate and heirs, offering privacy, efficiency, and financial
savings. However, it requires careful planning and coordination to avoid potential risks. By consulting
with legal and financial professionals, you can develop a comprehensive estate plan that balances
probate and non-probate strategies, ensuring a smooth and secure transfer of your assets.
Written by ROBERT FRIEDMAN
Friedman & Ranzenhofer