You should definitely know the basic facts about probate when you are making your estate planning decisions. In this post, we are going to focus on shortcuts that can circumvent the full process. However, we will start with a broad overview to help you see a complete picture.
Most people assume that they should use a will to record their final wishes. This is certainly an option, and you name an executor when you are drawing up the document. They will administer the estate after your pass away, and any willing, competent adult can be designated.
You could alternately use a professional fiduciary. Trust companies and the trust departments of banks provide fiduciary services for a fee.
The executor will be required by law to admit the will to probate. This is a legal proceeding that takes place under the supervision of a court. Final debts are paid during probate, so creditors are notified about the passing of the decedent.
An estate bank account will be established, and they will identify and inventory the assets. They will be prepared for distribution, and this will typically require appraisals and liquidation.
This process will take close to a year in most cases even if there are no complications. The inheritors cannot receive anything while the estate is being probated, so they have to wait it out.
Probate expenses reduce the estate’s value before the inheritances are distributed. An attorney and an accountant may be engaged, and the executor is entitled to payment. There are appraisal and liquidation fees, court costs, and other incidental expenses.
Thirdly, there is the loss of privacy, because the records are available to anyone that goes through the appropriate channels. Clearly, there are some drawbacks that go along with the probate process.
Simplified Probate Process
There is a simplified probate process for small estates in the state of Connecticut. If the value of the estate is $40,000 or less, and there is no real estate involved (unless it is held in survivorship form), this process may be available. It can potentially be used by a surviving spouse, next of kin, or another court-approved inheritor.
The executor will file a written request with the court, and an affidavit must be included. Assets and liabilities must be listed on the affidavit. It must also attest to the decedent’s status as a state benefit recipient or lack thereof.
Probate-Free Transfer Methods
There are some types of transfers that are not subject to probate, even if you are not intentionally trying to avoid it. When you open an account at a bank or a brokerage, you can make it a payable on death account. You simply add a beneficiary that will inherit the assets outside of probate after your passing.
This can sound like a simple solution, but there are drawbacks and limitations. A do-it-yourself improvisation that centers around a payable on death account is no substitute for a professionally prepared estate plan.
We touched upon the concept of survivorship in the previous section. If you own property, you can rework the ownership documents to create a joint tenancy, and it comes with right of survivorship.
For example, let’s say that you own a home, and you make your son the joint tenant. If you die first, he will become the sole owner of the home outside of probate. Once again, that sounds good on the surface, but it can go very wrong.
As soon as you name your son as a joint tenant, his financial problems become your problems. This is because he would own half of the property immediately. If he is sued, his portion of the property would be available to the litigant seeking redress.
The intentional utilization of a revocable living trust as a probate avoidance tool is much more effective. Assets that are held by a living trust will be transferred to the beneficiaries outside probate. We will get into the details in future posts.
Attend a Complimentary Seminar!
We are holding a series of seminars over the coming weeks that cover the most important estate planning topics. There is no charge, and you can visit this page to get the details: Connecticut Estate Planning Seminars.