Have you ever heard the term “probate avoidance” without knowing exactly what it is all about? A lot of people would answer this question in the affirmative, so we will provide an explanation here.
The probate court is the specific court that presides over estate matters. When someone dies without a will or trust, the court would supervise the estate administration process. They would appoint a personal representative, and the business of the estate would be conducted.
This would involve the payment of final debts, including taxes. At the end of the process, the assets would be distributed according to the intestate succession laws of the state of California.
If you do have a will, it would be admitted to probate, and the same process would unfold with a lot more certainty.
You would name your executor when you execute the will, so there would be no need for a court-appointed personal representative. And of course, the asset distribution choices that you record in the will would be honored.
We should point out the fact that the probate court has jurisdiction over guardianship and conservatorship matters. In addition to child guardianship, this court can be petitioned to appoint a conservator to act on behalf of an incapacitated adult.
Probate serves a purpose, but it creates hassles for the rightful heirs to an estate. It will take eight months to a year in most cases, and no inheritances are distributed while the estate is being probated.
Expenses accumulate during probate as well, and these expenditures reduce the value of the estate before it is transferred to the inheritors.
It provides an open window of opportunity for disgruntled parties that may want to challenge the will, and it is a public proceeding. Anyone that has an interest can access probate records to find out how the resources were distributed.
Transfers Outside of Probate
Some types of asset transfers are not subject to the probate process. Life insurance proceeds would be paid directly to the beneficiary, and the court would not be involved.
Payable on death accounts are bank and brokerage accounts that have beneficiaries. Transfers to the beneficiaries of these types of accounts are not subject to probate.
Property that is held in joint tenancy would be transferred to the surviving joint tenant in a probate-free manner as well.
When it comes to the transfers that would be subject to probate, you can proactively implement an avoidance strategy. The revocable living trust is the most commonly embraced solution, and these trusts provide several different advantages.
First, if you establish a living trust, you would act as the trustee and the beneficiary while you are alive. As a result, you would have complete control of the assets, and you could revoke the trust if you ever choose to do so.
The whole point is to use the trust as the centerpiece of your estate plan, so you would name a successor trustee to assume the role after your death. Your heirs would be the successor beneficiaries.
After your passing, the trustee would distribute assets to the beneficiaries, and the probate court would not be a factor. This is just one of the benefits, but there are others that we will look at in a future post.
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