7 Ways To Avoid Probate

Probate is the legal process by which a court oversees the distribution of property left by a Will. In other words, if you have a Will drafted, your family will need to hire a Probate lawyer and file a Probate case in court after you have passed away.

During the Probate process, your estate assets are identified, all of your debts and estate taxes are paid, and then your remaining estate property is finally distributed to your family and beneficiaries at the end of the Probate process.

Probate proceedings generally take many months to complete, and sometimes even years in a complicated estate. The average Probate proceeding drags on for about at least a year before your estate is actually distributed to your family and beneficiaries.

This means that your loved ones are stuck waiting on the Probate court to hold hearings and issue court orders before they receive the inheritance you left for them in their time of need when you’re gone.

Probate is a technical area of the law and one that can be very complicated. While some very small estates can be handled without a lawyer, most Probate estates require the use of a lawyer. Attorney’s fees and court costs in a Probate can be in the thousands of dollars.

So How Can You Avoid Probate?

In order to avoid Probate, you must transfer title of your estate assets before you die using a Probate avoidance method.

1. Joint Tenancy Deed. Joint Tenancy is a form of shared property ownership with the key element that the surviving owner of joint tenancy property automatically inherits the share of a deceased owner. No Probate is needed. But, there are many problems that can arise with Joint Tenancy deeded property. One major problem is that you lose individual control over any asset that you title as jointly owned. The other person on the jointly held title can control what happens to the property. Further, creditors of the owners of jointly held property can now go after the property for collection on unpaid loans, credit cards, or any other debts due from the other title holder of the property, even if it’s not you who owes the debt. Another danger is that jointly held property opens up liability to you for the negligence of the other title holder, such as a car accident or other law suit. Joint tenancy is usually not a Probate avoidance method that we generally recommend.

2. Pay-on-Death (POD) or Transfer-on-Death (TOD) designations. Placing a POD or TOD designation on your Beneficiary Designation form for your bank accounts, retirement accounts, and brokerage accounts is a quick and easy way to have your assets in these accounts pass on to the person that you designate using the POD or TOD designation. Using these designations on bank accounts or stock accounts will avoid Probate. The problem can be that the person you designate as your POD or TOD to receive these assets may not be alive at the time of your death. If that happens, then your assets will pass to the person’s spouse, children, or other heirs under the Law. You may not have intended for this. So you should have an attorney review any POD or TOD designations that you may have made.

3. Life Estate Deeds. A life estate deed grants you the right to live on the property (or lease it to someone else) during your lifetime. At your death, the other person on the title (called the “remainderman”) inherits the property automatically. So no Probate is needed. But a life estate deed ties up your property if you later decide to sell it or transfer it to someone else. You will need to get the approval of the other person on the deed (remainderman) to sell or transfer the property. If that becomes a problem, you will have to go to court to sue for the sale and division of the property value between the property (called a “Partition” suit).

4. Life Insurance Beneficiary Designation. Life insurance proceeds go directly to the person you have listed as the beneficiary for the policy without going through Probate. But the same issue happens as above in #3 POD and TOD accounts; that is, that the person you designate as the beneficiary of your policy may not be alive at the time of your death. If that happens, then your life insurance will pass to your beneficiary’s spouse, children, or other heirs under the Law. Probably not what you intended to happen.

5. IRAs, 401(k)s, and Other Retirement Plan Designations.  Just as you can use a POD or TOD designation in #3 above, retirement plans allow you to leave any money remaining in the account to a named beneficiary. The money is transferred automatically to your beneficiary when you pass away. Probate is avoided. But what happens if your named beneficiary has also passed away? Read above at #3 and #4 to be reminded how unintended beneficiaries could receive your hard-earned assets.

6. A Very Small Estate. The small size of your estate generally will not allow you to avoid Probate court altogether, but it may allow you to use a “simplified Probate procedure.” The size of an estate that qualifies to use the simplified Probate process depends on your State’s Probate laws. In Florida, estate assets ranging from less than $5,000 may qualify for the simplified Probate procedure. Schedule a Zoom conference today at mail@themendezlawfirm.com to determine if this option is available for your estate size.

7. Living Trust. Your best choice! Transferring your assets into a Living Trust before you die allows you to retain full control over your property while you live. After you die, your property that you transferred into a Living Trust can then be passed on quickly to your family and beneficiaries without having to go through Probate. At The Mendez Law Firm, we prepare Living Trusts for the majority of our clients. Schedule your FREE Zoom Conference today at mail@themendezlawfirm.com to discuss in detail how a Living Trust can protect your assets, your family, and even your business.