One concern that many people have and which can be very important is to arrange one’s estate in such a way that everything will “avoid probate” at death. Probate is sometimes talked about as if it were the most important thing you can do because otherwise, it is said, the government will take everything!
In fact, however, probate does not cause anything to go to the government in taxes or otherwise; rather “probate” is the generic term used to describe the administrative process whereby the Probate Court system – guided by state statute – oversees the beneficiaries of those assets that are left in one’s sole name at death, i.e., those assets which on their “title page” do not have a named successor owner.
Certain assets by their nature will avoid probate because they do have a designated successor owner. Such assets include life insurance (payable to a named beneficiary), jointly owned assets (which pass by right of survivorship) and pension plans and IRAs (which have designated beneficiaries).
A Will Alone Won’t Avoid Probate
Note that even if you have a will, you do not avoid probate. Your will governs the disposition of assets in your sole name. Upon death, your will is filed with the probate court and once approved and allowed, the personal representative nominated in your will is given the authority to collect your assets, pay any bills and debts, and then distribute the assets in accordance with the terms of the will. That entire process is overseen by the Probate Court.
If you do not have a will, your assets will be disposed of according to your state of domicile’s laws of intestacy. While generally it will be your family members who will inherit your property per the intestacy laws, the amount that each family member may receive may not be the amount that you would wish they inherit. It is preferable to have a will in place that spells out clearly how you would like your assets disposed of in the event of your death.
The probate procedure for administering an estate where the person has a will and where a person does not have a will is virtually the same. Having a Will, however, ensures that your assets pass in the amounts and to the people you intend to inherit. In both situations, a personal representative will be appointed by the Probate Court. If you have a will, the personal representative appointed will be who you wished to serve instead of who has priority under the law to seek appointment. No matter who is appointed to serve as the Personal Representative, the job is the same: collect any assets in the decedent’s name, pay any bills and debts, and distribute the assets (either to the “devisees” under the will or to the “heirs-at-law” in the intestate situation).
Why Is Avoiding Probate Important?
The reasons why many hope to avoid probate is to avoid the delay, publicity and expenses associated therewith. Because the fees payable to attorneys in probate are often a function of the time spent and because avoiding probate saves considerable time, avoiding probate minimizes the fees payable by your family for estate administration.
Privacy And Simplicity
More important than fees, however, is the simplicity and privacy with which your estate, if not involved in probate, can be administered. Your probate estate becomes a public record into which anyone can peer without needing any reason other than curiosity. The world can see the extent of your assets, the beneficiaries to whom you are leaving those assets, and the terms upon which you are leaving those assets.
Add to that the simplicity that avoidance of probate can provide (by not requiring the extensive inventories, petitions, accounts, etc. that the probate court requires) and a very good case can be made for keeping matters out of the probate courts.
How Can I Avoid Probate?
Avoiding probate can be easily achieved through the creation of one or more trusts during your lifetime. Avoiding probate thus becomes a simple matter. The assets you currently own will be transferred now into trust rather than simply waiting until death to have your will add assets to the trust.
At your death you would not own any assets in your own name; instead, you would have already given the assets to the trustee who is able to administer and dispose of them immediately at your death in accordance with the terms of the trust without needing any authority from a court.
Trusts Are Flexible
The authority as to what happens to your assets are set forth by you through the terms of the trust. Even if you are named as the initial trustee, as is typically done, death does not cause any court involvement because the co-trustee, if any, and otherwise, the successor trustee can serve automatically in accordance with the terms of the trust.
Thus, instead of you personally owning your assets, you would have your assets owned by yourself as trustee for the benefit of yourself during your lifetime. This places no restrictions on your access to the assets, but it does allow for the assets to pass on to your family or other designated beneficiaries without the probate court becoming involved at your death.
In The Event Of Incapacity Or Disability
In addition, in the event of your disability, the assets can be administered by a successor trustee without resort to the courts for the appointment of a guardian. That alone can save significant time and expense as well as much adverse publicity in the event of disability. (Appointment of a guardian requires publication of notices in the local newspaper.)
As noted above, funding the trust during lifetime avoids probate which keeps matters private at the time you die: nothing has to be listed at the probate court with respect to the ownership of your assets. Furthermore, because no court delays would be involved, your family would have total access to your assets immediately upon your death.