You may come across mention of the term “probate avoidance” if you are poking around looking for estate planning information. This can make you wonder if avoiding probate is really necessary. Let’s look at the facts, and you can make the final decision.
Probate is a legal process, and it takes place under the supervision of a court. There are certain types of asset transfers that would not be subject to the probate process, so assets can sometimes be transferred outside of probate even if there was no particular intention to avoid it.
Property that is held in joint tenancy can be transferred outside of probate, and life insurance proceeds would not be subject to the probate process. If you have a bank or a brokerage account, you could add a beneficiary. This is called a payable on death or transfer on death account. Assets in this type of account could be transferred to the beneficiary after your passing outside of probate.
The property that would be subject to the probate process is property that was in your direct personal possession at the time of your passing. Probate would enter the picture if you had no estate planning documents at all, and if you have a will, it would be admitted to probate.
This process exists to provide protections to certain interested parties. To provide an example of what we are talking about, let’s say that a friend borrowed $100,000 from you. He passed away shortly after taking out the loan, and he did have assets is his possession at the time of his passing.
Do you think that you have a right to payment if there are assets in his estate? This is part of why the probate process exists. When a will is admitted to probate, the executor or personal representative must notify creditors. They are given a certain amount of time to come forward seeking payment while the estate is being probated.
Here is another good reason why the probate process exists, and once again, we will explain by example. Let’s say that your father told you that he had a will, and he told you that you are named in the will. As he reaches an advanced age, you notice that he is being manipulated by a new “friend.”
After your father’s death, the friend is in possession of a will that leaves this individual the entirety of your father’s estate. You and your siblings are left out. If there was no probate process, no legal entity would be there to provide supervision if the family wanted to come forward contesting the validity of the will.
As you can see, the process serves a purpose, but there are reasons why avoiding probate may be appealing to some people.
The probate process takes up a lot of time. A typical case that is not especially complicated will take around a year to run its course, and the heirs do not receive anything while the estate is being probated by the court.
This is not a very appealing prospect. You passed away with assets in your possession, and you wanted your resources to go to your family members. Why would you want them to have to wait in limbo for a year or more?
Expenses also accumulate during probate, and this is another reason why avoiding probate sounds like a good idea to many people.
There is also the matter of privacy. Nobody wants everyone in town to have knowledge of their financial decisions. However, when it comes to probate, the general public can access probate records. Anyone who is interested can obtain these records, and your sensitive final decisions would be out in the open.
One way to go about avoiding probate would be to use a living trust as your primary estate planning tool instead of a will. Assets that have been conveyed into a living trust could be distributed among the beneficiaries by the trustee that you choose outside of the probate process.
This is one option when the circumstances are relatively simple and straightforward, but there are more complicated objectives that could be satisfied through the utilization of other types of trusts. These transfers can take place outside of probate as well.
Download Our Special Report
If you would like to take a closer look at the pros and cons of probate and probate avoidance, download our in-depth special report. This report can be accessed through this website free of charge, and you can click this link to get your copy: Free Probate Report.