The most common estate planning document is the simple will. If you express your final wishes in a will, the executor that you name would admit the document to probate after your death.
This is a court supervised proceeding. During probate, creditors are notified about the decedent’s passing, and final debts are paid. The assets are prepared for distribution to the heirs, and the court determines the validity of the will.
If everything goes smoothly and the situation is not especially complicated, probate will run its course in about eight or nine months. The inheritors receive nothing while the estate is being probated, so they have to play a waiting game, which is less than ideal.
Simplified Probate Procedure
In Connecticut where we practice, there is a simplified probate process for small estates. If there is no real estate involved, and the value of the estate does not exceed $40,000, the full probate process can potentially be avoided.
There are some types of transfers that are not subject to probate. If you own property, you can create a joint tenancy. When you make someone a joint tenant of your property, they will inherit the property after passing, and the probate court will not be involved.
This sounds like a neat and tidy solution, but there is a major potential negative. The joint tenant would own half of the property while you are still living. As a result, you would not be able to sell the entire property without the cooperation of the joint tenant.
Plus, there is the matter of legal actions. If the joint tenant is sued, their ownership interest in the property would be available to the litigant that is seeking redress.
When you start a bank account or a brokerage account, you can make it a payable on death account. These accounts are sometimes called “Totten trusts.” You add a beneficiary when you have this type of account, and they would inherit the account after your death outside of probate.
If you have an individual retirement account that is going to be handed down to a beneficiary, the probate court would not be involved in the transfer. Life insurance payouts fit into this category as well.
Revocable Living Trust
In addition to the time factor, there are a couple of other probate drawbacks. The records are available to anyone that wants to access them, so there is a loss privacy. Probate expenses reduce the value of the estate before it is distributed to the heirs, and this is another negative.
You can proactively implement a probate avoidance strategy, and it will revolve around the utilization of a revocable living trust. As the name indicates, you would be able to revoke the trust if you change your mind, and you would be the trustee while you are living.
When you establish the trust, you name a successor trustee to serve as the estate administrator after your passing. They can also be empowered to manage the trust in the event of your incapacity.
After your death, the successor trustee will actively assume the role, and they will follow the instructions in the trust declaration. The assets will be distributed to the beneficiaries in accordance with your wishes, and the probate court would not be involved at all.
To account for property that may have been in your personal possession at the time of your death, you should include a pour over will. This document will allow for the transfer of these assets over to the trust, and this will streamline the process.
Schedule a Consultation Today!
You should definitely consider the implications of estate administration when you are planning your estate. We can gain an understanding of your situation and your objectives and explain your options so you can make informed decisions.
At the end of the process, you will go forward with a tailor-made plan that ideally suits your needs. If you are ready to get started, you can schedule a consultation at our Westport or Glastonbury, CT estate planning offices if you call us at 860-548-1000.
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