You should definitely understand some basic facts about probate when you are planning your estate. This is a process that takes place under the supervision of a court. If you state your final wishes in a will, the executor you name as the administrator would admit the will to probate.
The executor is required to notify creditors about the passing of the decedent, and they are given time to request payment. Assets that will comprise the estate are identified and inventoried by the executor, and they are prepared for distribution, so appraisals and liquidation will be necessary.
There is a proving of the will during probate. The court will examine the document to determine its validity, and if anyone wants to contest the will, they can make a case while the estate is being probated by the court.
Even if everything goes smoothly, the probate process can take eighteen to twenty-four months in California, and no inheritances are distributed while the estate is in probate. Complicated cases such as the Anna Nicole Smith estate dispute with the Marshall family can be stalled in probate for years.
The time consumption is one of the negatives, and there is also the expense factor. Probate costs include the executor’s remuneration, court costs, legal and accounting fees, and appraisals and liquidation charges. This red ink can significantly reduce the value of the estate.
Do you reveal your financial decisions to anyone that is interested in them? Most people value their privacy in this regard, but when an estate goes through probate, the records are public. Any interested party can access them to find out how you decided to distribute your assets.
Now that you have an understanding of the drawbacks, you can see why people take steps to facilitate asset transfers outside of the probate process.
There are a handful of different types of transfers that are simply not subject to probate even if you are not intentionally trying to avoid it. Joint tenancy is one of these methods.
If you own property, you can create a joint tenancy and make someone else a co-owner of the property. It comes with right of survivorship, so the surviving joint tenant inherits the deceased joint tenant’s interest in the property after their death, and the court is not involved. However, they will likely be a probate when the last tenant dies.
A payable on death account is a bank or brokerage account with a beneficiary. When you establish one of these accounts, while you are living, the beneficiary would not have access to the funds.
After your death, they would present the death certificate to the institution in question, and they would inherit the assets in the account outside of probate. In California, you can choose a transfer on death option when you register your motor vehicle.
Life insurance proceed transfers are not subject to probate, and the transfer of an individual retirement account to a beneficiary would not go through probate. Be extremely careful of naming minors as beneficiaries.
Proactive Probate Avoidance Strategy
A revocable living trust is the ideal alternative to a simple will if you want to facilitate probate-free asset transfers. While you are living, you would be the trustee, so you would not lose control of your assets on any level.
In the trust declaration, you name a successor to administer the trust after your death, and your heirs would be the beneficiaries. When the time comes, the trustee would distribute assets to the beneficiaries in accordance with your wishes, and the probate court would not be involved.
When you have a living trust, you can include a spendthrift provision that will protect the principal from the beneficiaries’ creditors. You can also instruct the trustee to distribute the assets over time to prolong the viability of the trust.
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