When you think about estate planning, you likely focus on creating a plan for the distribution of your estate assets when you are gone. Although that may remain your primary estate planning goal, you will probably also include additional, related goals as your estate plan grows. A common goal found in many comprehensive estate plans is probate avoidance. In reality, avoiding probate entirely may be impossible; however, with some careful planning, you can create an estate plan that dramatically reduces the amount of time and money spent on the probate of your estate. That, in turn, may make much-needed assets available to loved ones much sooner after your death.
What Is Probate and Why Is It Necessary?
When a person dies, he or she leaves behind an estate that consists of all the assets the individual owned or had an ownership interest in at the time of death. This includes both real and personal property as well as both tangible and intangible assets. Probate is the legal process that many of those assets must go through before eventually being transferred to the intended beneficiaries or legal heirs of the estate. In addition, probate serves to identify, locate, and value those assets as well as notify creditors of the estate and provide them with the opportunity to file claims against the estate. If a Last Will and Testament was executed by the decedent prior to death, probate also authenticates the Will, or in the alternatives, provides the legal forum for contesting the authenticity of the Will. Finally, probate ensures that any state and/or federal gift and estate taxes owed by the estate are paid.
Why Is Avoiding Probate A Common Goal?
Avoiding probate is a common estate planning for several reasons. First, if your estate goes through probate, the terms of your Will, and therefore the gifts you made in that Will, become public record. By avoiding probate you can keep details regarding the distribution of your estate private. Second, probate is time-consuming. In Connecticut, creditors have five months after notification to file claims. Consequently, probating even a modest and uncomplicated estate typically takes a minimum of six to eight months. Often, the probate process can take a year or longer, meaning beneficiaries must often wait a long time to receive their intended gifts. Finally, probate can be expensive. Everyone involved in the probate of an estate, including the Executor/PR, attorneys, appraisers, real estate agents, and accountants, are entitled to a fee for their services. The cost of probate can significantly diminish the value of the estate that is ultimately distributed to loved ones.
How Can Probate Be Avoided?
Although your estate may not be able to completely avoid probate, you can dramatically reduce your estate’s exposure to probate using some common probate avoidance tools and strategies. The key to probate avoidance is to leave as few probate assets as possible at the time of your death. Not all assets are required to go through probate. By converting as many estate assets as possible to non-probate assets, or removing the assets from your estate entirely, your estate may escape a lengthy probate process.
Lifetime gifting is always an excellent probate avoidance strategy. By transferring assets to intended beneficiaries while you are alive you remove them from your probate estate as well as gaining tax advantages in many cases.
In addition, the more non-probate assets you have in your estate, the less time your estate will need to spend in probate and the sooner loved ones will receive their intended inheritance. Common non-probate assets include:
- Trust assets – assets held in a trust are non-probate assets and can be distributed immediately if the trust terms dictate. Most assets, including you home, can be held in a trust.
- Jointly held property with rights of survivorship – certain types of jointly held property does not go through probate. The key is that the property must be held jointly with rights of survivorship. Your interest will pass directly to the co-owner upon your death.
- POD and TOD accounts – Most financial accounts, as well as investment accounts and securities, can be designated as “Payable on Death (POD)” or “Transfer on Death (TOD)” accounts which allow you to designate a beneficiary that will become the owner of the account upon your death. The beneficiary, however, will have no ownership interest in the asset while you are alive.
- Proceeds of life insurance – are non-probate assets and can be distributed immediately.
- Retirement accounts – can usually be transferred directly to the named beneficiary without going through probate.
Contact Connecticut Probate Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about probate, contact the experienced Connecticut probate attorneys at Nirenstein, Horowitz & Associates, P.C. by calling (860) 548-1000 to schedule an appointment.