Avoiding Probate: 8 Ways How You Can Do It

Avoiding Probate: 8 Ways to do it

Probate is the legal process through which an executor distributes and settles the estate after the death of the estate owner. The process is usually initiated by the executor by submitting a death certificate and the will to the court.

The process becomes longer and it becomes almost impossible to avoid probate without a will. In these cases, the court decides how the property should be distributed to the beneficiaries. The probate laws, however, vary from state to state, making it extremely important to check with the respective laws before making any plans.

Why is it good to avoid probate?

  • It can be expensive: Although probate costs vary from state to state, they generally include executor fee, attorney fee, court fee, and administrative expenses like appraiser’s fee. This fee gets exacerbated if the process goes on for much longer and/or if the estate’s value is large. Commonly, the total fee amounts to 3-8% of the estate’s total value.
  • It can be time-consuming: Depending on the complexity and size of an estate, the probate process can easily take over six months to get settled. Sometimes it can even take years before the estate is settled and the assets are distributed.
  • It gives away privacy:The probate process involves filing all important documents in a public directory. Everything that happens in the state court goes into a public record that denies privacy to the living members of the family.
  • It can be emotionally draining: Probate processes are generally long and expensive affairs that can be draining for the family members involved. This is especially true if the will is being contested in court. The lack of privacy in the probate process is another cause for this emotional burden of loved ones.

How to avoid probate?

The size of assets that pass through probate, like those listed in a will, determine how long and how expensive the process would be. Knowing what assets can avoid probate helps create a strategy to help your loved ones avoid probate. Limiting the size of your estate to avoid probate and expedite the process usually makes it easier for your loved ones. 

This can be done by using different techniques to turn your assets into non-probate assets like the ones listed below:

  1. Giving away assets when alive: An intelligent way to keep your loved ones out of probate is by planning ahead for it by transferring the assets before you pass away. This way, the estate value reduces, consequently reducing the probate expenses. Moreover, your beneficiaries can even avoid estate and inheritance taxes.

  2. Establish a Living Trust: Trusts are managed and distributed separately from courts because they do not form a part of your estate. When you die, the named Trustee manages and distributes all the assets inside of it, as per your guidance. Unlike the probate process, here, there is no legal supervision from courts and retains your privacy throughout. This way, you can use a living trust to avoid probate.

  3. Add Beneficiaries to Payable-on-Death accounts: Name beneficiaries for all your payable on death accounts. This way, the proceedings from these accounts go directly to your beneficiaries, avoiding probate. These accounts include:
    • Retirement accounts
    • Stocks and bonds
    • Insurance policies
    • Bank accounts
    • Pension plans

  4. Use Transfer-on-Death: Similar to payable-on-death accounts, you can change security registrations, vehicles registrations (check with your state’s motor vehicle department website), and real estate to transfer-on-death. This lets your beneficiaries directly receive the assets after your death without having to go through probate.

  5. Probate your Will when alive: Pre-death probate can help you reduce family disputes, legalize your wishes before your death and keep your loved ones out of long court battles after you pass away. However, you can still change your Will after going through pre-death probate, consequently wasting time and resources. This facility is available only in Alaska, Arkansas, North Dakota, and Ohio.

  6. Gift your assets: Gifting property while you’re alive helps your loved ones in avoiding probate and even lowers costs by reducing the monetary value of your probate assets. Moreover, gifts up to $1 million aren’t subject to the federal gift tax.

  7. Jointly owned property: Titling property jointly can transfer the assets from one person to another directly, thereby avoiding probate. You can hold assets as:
    • Community property with the right of survivorship: You can co-own property with your legal partner via. community property with the right of survivorship. This way, if a partner dies, the surviving one automatically owns the asset. However, community property is available only in these nine states in the US:
      • Arizona
      • California
      • Idaho
      • Louisiana
      • Nevada
      • New Mexico
      • Texas
      • Washington
      • Wisconsin
    • Joint tenancy with right of survivorship: Property owned under joint tenancy automatically transfers the asset to the surviving owner when another passes away.
    • Tenancy by the entirety: Similar to joint tenancy, tenancy by entirety avoids probate by automatically transferring assets after the death of one partner. However, this can be used only by married couples and same-sex couples registered with the state.

  8. Create a Digital Estate Plan: Assets are now digital too. More people are now realizing the monetary and sentimental value of digital assets and the need for loved ones to have access to them. Creating a digital estate plan can help your loved ones access your digital data without spending long and expensive hours in courts.