How to Avoid Probate
Most people would agree probate is a process you don't ever want to deal with. It's time-consuming, costs money, can lead to conflict within the family and create all kinds of ugly scenarios. The purpose of probate is to ensure the decedent's wishes are met by proper distribution of assets and resolve creditor claims, tax liens, etc., if they exist. The process can take months, even years, to complete.
The main reason probate takes so long is due to the fact that considerable clerical work is involved. Facts and figures must be checked, creditors must be paid and tax forms need to be filed. Many probate court systems are understaffed and overloaded with probate cases. Even if all family members agree and there are no creditors involved, probate typically takes a minimum of six months.
One of the best ways to avoid probate is through the drafting of a revocable living trust. In a trust you specify who you want to inherit your valuable property. Legal title to property is transferred to a designated individual known as a trustee. You can assign either yourself or someone else as the trustee. Property which is held in the trust avoids probate because it is not considered part of the estate.
Another option for avoiding probate is to give away property while you're still alive. Individuals diagnosed with terminal illness oftentimes gift valuables and real estate to their loved ones. Doing so reduces the size of the estate and lowers probate costs. You can give away property at any time in your life; however, if you give more than $12,000 to any one person in a calendar year, you'll need to file a federal gift tax return.
If you have a bank account, you can keep the funds out of probate by setting it up as a payable-on-death (P.O.D.) account. Using a form provided by the bank, you name the person you want to inherit the money in your account. The beneficiary does not have access to the funds while you are alive and you can change the named individual at any time. Spousal joint bank accounts typically become the property of the survivor, without probate. However, it's a good idea to file a paid-on-death form to guarantee avoidance of probate.
Some states allow automobile owners to name a transfer-on-death beneficiary. Doing so allows the beneficiary to assume ownership of your vehicle upon your death, while avoiding the probate process. Similar to the P.O.D. account, the beneficiary holds no rights to the vehicle and can be changed at any time. Inquire with your state's department of motor vehicles or visit their website to determine if transfer-on-death beneficiary is available.
These are a few ways to avoid probate. Depending on your financial situation and assets, there are additional options available. If you own a considerable amount of assets, it's best to contact an attorney who is well-versed in Inheritance Law.
Published on January 19, 2008 at 10:49 AM