Avoiding Estate Probate

Probate refers to the legal process in which a person’s assets are distributed upon their death, according to their specific instructions that they left in their will. The actual probate process involves a series of filings and hearings that are presided over by a probate judge.

Although the specific process can vary from state to state, the probate process generally involves the following:

• Determining and proving the validity of the decedent’s (i.e. person that passed away) will;
• Submitting an inventory and appraisal of the decedent’s property;
• Ensuring that all of the estate’s taxes and debts are paid, and on schedule; and
• Ensuring that all of the estate assets are distributed, either according to the decedent’s will, or in accordance with the intestacy laws of the state in which the testator lived.

Generally speaking, the estate executor is a person who is responsible for initiating the probate process. The executor will also be responsible for distributing the estate’s assets to the named beneficiaries. Typically, the executor will be named in the will, often with an alternate executor named should the first executor be unable to fulfill their duties. If the named executor fails to initiate the probate process, any party that has an interest in the estate may initiate the probate process in their stead.

Interested parties can include any person who could gain or inherit from the will, such as a creditor or beneficiary. If the will did not name an executor, or if the named executor is unavailable, the court will then appoint an executor of its own in order to oversee the probate process.

It is important to note that the term probate can have dual meanings, depending on the circumstances of the case. Probating a will can refer to the process of presenting the decedent’s last will and testimony to the appropriate court, after which a judge will grant permission to distribute the property as it is dictated by the will’s language.

Alternatively, the term probate can be used to refer to when a person has died without a will, or without a valid and legally binding will. In such a case, that person will be deemed to have died intestate, or without a will. The intestacy process is the process through which the deceased’s estate is disposed of.

The intestacy process is dictated by the law in that jurisdiction, and is carried out with judicial oversight. By either definition, the heirs of the deceased must interact with the appropriate probate court where their loved one lived in order to properly distribute their estate to the right beneficiaries.

Should Probate Be Avoided?

Generally speaking, most people would prefer to avoid the probate process because it is often time-consuming and expensive. Additionally, the probate process does not allow for any privacy due to the fact that probate hearings are matters of public record.

The biggest advantage to avoiding the probate process would be cost. Probate costs generally include attorney’s fees which can be expensive, especially if the decedent owns property in a different state. This is because probate proceedings would be required in both states, although a trust would likely correct this problem. Trusts can also be tailored to meet specific requests, which is not necessarily true of the probate process.

Because the execution of a trust is much less formal when compared to a will, the terms of a trust can easily be modified to suit the needs of the estate. Trusts as a probate alternative will be further discussed below

Another advantage to avoiding the probate process is that probate can be complicated and time consuming. The probate process can last as long as several years in order to completely resolve all matters related to the decedent’s estate. Avoiding the process can help settle matters more quickly and efficiently.

Wills and probate proceedings are matters of public record. As such, if you would prefer to keep your affairs private, you will need to distribute your estate through a trust or some other probate alternative as discussed below.

There are some disadvantages to avoiding probate that should be considered before proceeding. Generally speaking, it will cost slightly more to create and fund a trust than it does to create a will. However, as previously mentioned, doing so could save money in the long run by avoiding paying probate costs out of the estate.

Additionally, in order to completely avoid the probate process, all new assets that you obtain must be placed carefully into the trust. Otherwise, the probate process may still be necessary. Finally, taxes can be slightly higher for the first years after your death if the estate is distributed through a trust, as opposed to being distributed through a will.

What Are Some Alternatives To the Probate Process?

There are several alternatives to the traditional probate process. If an estate is particularly complicated, there are different ways to pass property on to your heirs without probating a will. Some examples of this include:

• Trusts: A trust is a legally binding document allowing someone to transfer property into a separate legal entity for safekeeping for any of their named beneficiaries. The trust creator, referred to as the trustor or settlor, appoints someone to hold or oversee the property (referred to as the trustee) for their beneficiaries or heirs. The trustee distributes that property to the beneficiaries after the trustor dies, according to the language contained within the trust.
  • It is important to note that there is a difference between a testamentary trust, and an inter vivos or living trust. A testamentary trust is executed after the probate of a will, while living trusts are created while the trustor is still alive. Probate can be avoided altogether by creating an inter vivos trust and having the contents distributed upon the death of the settlor. An inter vivos trust costs more to create and maintain when compared to a will, but this specific type of trust can help your heirs avoid probate altogether. Because no probate court approval is needed, executing a trust generally takes far less time than executing a will;
• Joint Tenancy: Joint tenancy involves two or more individuals owning an equal, undivided interest in property. Most married couples already own property in joint tenancy, such as a home, whether or not they realize it. When one person dies, the other will automatically inherit their share through the right of survivorship. The surviving party may have the property transferred into their name without court approval;
• Gifts To Minors: The Uniform Transfer To Minors Act (“UTMA”) allows an adult to give minors property as a gift, and as an alternative to the probate process. A custodian is appointed to manage the property or assets for the minor until they reach the age of majority which varies by jurisdiction, but is generally eighteen. They distribute the property to them as needed. Through this Act, legal title remains with the minor, and they are entitled to full control of the property once they have reached adulthood;
• Life Insurance: Life insurance is known as a non-probate property, meaning that as long as beneficiaries are named in the policy, there is no need for probate for those beneficiaries to receive the funds. Additionally, life insurance is not subject to state or federal income tax, and in most states it is not subject to estate taxes;
• Payable-On-Death Bank Accounts: If you own the bank account in joint tenancy with a spouse or child, doing so already avoids the probate process. However, you can also designate the account with a payable-on-death instruction. Doing so names a person or persons that are entitled to the funds in that account once you die. These funds are immediately available with no need for probate; and
• IRAs/401Ks/Retirement Plans: Any money that is contained in an IRA or other retirement fund is deemed non-probate property. These funds are directly distributed to the named beneficiary, or beneficiaries.

Do I Need an Attorney to Avoid The Probate Process?

When you are ready to begin estate planning, you should consult with an experienced and local probate attorney. Because state laws can vary widely in terms of estate planning and probate, a local lawyer will be best suited to help you understand your state’s specific laws and create an estate plan that adheres to those laws.

An attorney can also help you plan your estate in order to distribute your estate in such a way to avoid the probate process, and ensure that your estate is distributed according to your wishes.