You may assume that the executor that you designate when you draw up a will can distribute assets to the beneficiaries shortly after your death with no supervision. In fact, this is not the way it works. The will would be admitted to probate, and the court would be involved.
What Happens During Probate?
Many people have debts when they pass away, including tax responsibilities. One of the functions of the probate court is to give creditors an opportunity to come forward seeking payment. The executor will post a notice for creditors, and legitimate final debts are paid.
In order to do this, the executor must establish an estate bank account, so they have to obtain an Employer Identification Number from the IRS. The court will make sure that the will has been properly executed, and estate challenges can be initiated during the probate process.
The executor will identify and inventory the assets, and they will be prepared for distribution to the heirs. When all the necessary tasks the been completed to the court’s satisfaction, the assets will finally be distributed to the rightful inheritors.
You may be surprised to hear that over 30 percent of people that are 85 years of age and older have Alzheimer’s disease. This is not the only cause of cognitive impairment, and some people become unable to handle their own affairs because of other health challenges.
Once you reach the age of 67, your life expectancy is 85 to 87 years, and this is an eye-opening statistic. You should prepare for life as an octogenarian, and you may not be able to make sound decisions at that point.
The probate court will handle incapacity situations. They can be petitioned to appoint a conservator to act on behalf of an incapacitated adult. You can prevent a conservatorship and name your own handpicked decision-maker through the execution of a durable power of attorney.
Transfers Outside of Probate
Under some circumstances, the probate process is not necessary when assets are being distributed after someone dies. One of these situations is joint tenancy with right of survivorship.
If you are a property owner, you can establish a joint tenancy with someone that you want to leave the property to after you are gone. After your passing, the joint tenant will become the sole owner of the property, and the probate court will not be involved.
You can choose a payable on death option when you open an account at a brokerage or bank. When you do this, you designate a beneficiary, and they would have no access to the funds while you are living. After your death, they would inherit the resources, and this would be a probate-free transfer.
Insurance policy proceeds are distributed to beneficiaries without probate court involvement. And if you are handing down an individual retirement account to a beneficiary, the court would not participate in the transfer process.
Proactive Probate Avoidance
Because of the time consumption, the expense factor, and the loss of privacy, you may want to implement a probate avoidance strategy. This will typically revolve around the use of a revocable living trust as the centerpiece of your estate plan.
While you are living, you would maintain complete control of the assets. After your death, the trustee that you name in the trust declaration would administer the trust. They would distribute the assets in accordance with your wishes, and probate would not be a factor.
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If you have determined that it is time for you to work with a Burbank, CA estate planning lawyer to develop your plan, we would be glad to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 818-937-2335.