When a person dies, the property they own becomes their estate. The estate must typically pass through court before the final transfer of property to heirs or beneficiaries. The probate courts help to ensure that a personal representative managing estate administration follows the instructions in a deceased’s will and complies with state law. The courts can also settle disputes about the estate at issue.
The probate process is somewhat notorious for taking months to complete and diminishing the value of estates. The more oversight and time in court an estate requires, the more probate costs a personal representative may need to pay. Typically, they use estate resources to pay the costs generated by probate proceedings.
There are numerous strategies people can use to prevent their assets from passing through probate court when they die. The right strategy can keep a person’s most valuable assets or the entirety of their estate out of probate court.
What probate avoidance options are common?
People who want their assets to pass to their beneficiaries quickly and with minimal expense can potentially minimize probate-related losses. They may benefit from planning in advance to keep their property out of probate court whenever possible. The three most common probate avoidance strategies involve making gifts to others while one is still alive, establishing joint accounts and funding trusts. Each of these strategies offers certain benefits and is also associated with particular drawbacks.
Gifts to loved ones allow testators an opportunity to witness their beneficiaries enjoy their inheritances. However, many people do not want to give up control over assets while they are alive, and large gifts to others can trigger tax obligations.
Joint accounts can be a convenient probate avoidance strategy, as co-owners retain control when one owner passes. Sharing access to resources does put those assets at risk however, making joint ownership less than ideal in some circumstances.
Trusts offer control over assets and allow for a more structured legacy. There are multiple kinds of trusts that can be useful in many different situations. Yet, many people find trusts intimidating and confusing, leading to them selecting other options when trusts might truly be the best solution available.
Sitting down with a probate and estate planning attorney can help people choose probate avoidance tools that work well for them. The right strategies can empower people to leave meaningful legacies unique to their needs and priorities.