It may not be one of your estate planning goals yet, but as your estate grows in the years to come. Probate avoidance will likely become of your most important goals. The good news is that because probate avoidance is such a common estate planning goal, there are a wide variety of tools and strategies aimed at helping an estate avoid the formal probate process. Given the personal nature of estate planning, you should consult with your estate planning attorney to determine how best to incorporate probate avoidance into your estate plan. To get you started, however, the Los Angles estate planning lawyers at Collins Law Group explain these 5 tips for avoiding probate.
What Is Probate?
Probate is the legal process that is typically required following the death of an individual. Probate serves a number of different functions, including:
- Authentication of the decedent’s Last Will and Testament (if one was left behind)
- Identifying, valuing, and eventually distributing estate assets
- Notifying creditors of the estate and allowing them to file claims against the estate
- Ensuring that state and federal taxes owed by the estate are paid
- Providing a legal forum for challenging the decedent’s Will
Why Is Probate Avoidance Such a Popular Goal?
Probate avoidance is a popular estate planning goal for several reasons. First, it can take a long time to get an estate through the formal probate process and probate assets cannot be distributed until the end of the probate process. Because creditors have four months to file a claim against the estate in California it generally takes a minimum of six months or so to probate even a relatively simple estate. The cost of probate is another reason to avoid it. Everyone involved in the process is entitled to a fee for their service, and those costs come out of the estate assets. Finally, people often seek to avoid probate because they wish the details regarding the distribution of their estate to remain private. As soon as a Will is submitted to the court for probate, it becomes open to the public and anyone can view the terms of that Will.
5 Tips for Avoiding Probate
The good news is that there are numerous tools available that, when used properly, can assist your estate to avoid probate. Five of the most common probate avoidance planning tools include:
- Creating a trust – assets owned by a trust bypass the probate process altogether. For this reason alone, people often create a revocable living trust and transfer estate assets into the trust. Because you can name yourself as the Trustee of the trust you can continue to manage and control those assets during your lifetime. Upon your death, the trust assets can be distributed to beneficiaries easily and quickly using the trust terms created by you.
- Changing account designations to “POD or TOD” – many financial accounts can be held as a “payable on death (POD)” account which allows you to designate a beneficiary who will automatically become the owner of the account assets upon your death. Unlike joint ownership, a designated beneficiary on a POD or TOD account/asset has no legal ownership interest in the account/asset while you are alive.
- Using the right type of joint ownership — when property is titled as joint owners “with rights of survivorship” it means that upon the death of one owner, his/her interest in the property automatically passes to the remaining co-owners without going through probate.
- Relying on life insurance proceeds in lieu of cash or other assets – life insurance proceeds also bypass the probate process. As such, a life insurance policy can be used strategically to help your estate avoid probate and provide loved ones with access to much-needed assets as soon as possible after you are gone.
- Relying on small estate alternatives to formal probate. It may not be possible to completely avoid probate; however, formal probate may be avoided if the assets that remain in the estate qualify for a small estate alternative to formal probate. If the value of the entire estate is modest enough, the estate may qualify to use a small estate affidavit to transfer ownership of the remaining assets.
Contact Collins Law Group
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns related to probate avoidance, be sure to consult with an experienced Los Angeles estate planning attorney. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.