There are a lot of good reasons to have a comprehensive estate plan, which can range from making sure that one’s affairs are in order (which is always a good reason) to asset protection, and for some people, estate tax avoidance. The one good reason that most people can benefit from is the avoidance of probate. In short, probate is the court proceeding that occurs when one dies with assets titled solely in their name. During this process the court determines how the assets are distributed, to whom, and at what time. The probate process can take time, anywhere from 6 months to over a year, and is usually costly as it generally involves hiring an attorney. Probate proceedings are also a public record (in case you are wondering how those real estate investors find out that you are inhering property, now you know). Lastly, and what often is a tragic outcome when little thought has gone into estate planning, the family battles over the deceased’s assets can leave a lasting scare.
So, how do you become “probate-proof”? A comprehensive estate plan should, among other things, analyze every asset held by the client to review whether it makes sense to register one’s assets in a manner to avoid probate and how to do so.
Common methods that are used to avoid probate are as follows:
- Establishing a revocable trust and registering certain assets to the trust (such as one’s homestead) is an effective way to avoid probate. As the name implies, a revocable trust can be altered and even cancelled during the life of the grantor, and then at death can hold and distribute assets to the grantor’s beneficiaries.
- Ensure that life insurance products and retirement plan accounts (such as IRAs, 403(b)s, and 401(k) accounts) have up-to-date primary and secondary designated beneficiaries so that these accounts are not left to the estate. Despite that oftentimes an IRA holds the bulk of one’s assets, beneficiary designations are overlooked.
- Ensure that one’s bank accounts have a payable on death designation so that the account will not have to be probated.
- Don’t forgot about timeshares – sometimes these are missed and are the sole cause of a probate proceeding. Joint ownership or ownership by a revocable trust will reduce the need to probate these.
A properly thought-out estate plan will of course include a review of the beneficiaries and distributions, and should also include a review of whether an estate will or should be probated.
Should you be interested in reviewing your estate plan or establishing an estate plan that seeks to fulfill your goals, please contact Carter Reymann Law at 727-456-8970 and we can discuss how we can help.