4 Ways of Avoiding Probate

Probate is the legal process of distributing your assets to designated beneficiaries. This process also includes verifying a will (if there is one) and paying any outstanding debts or taxes left by the deceased. 

The probate process can be lengthy and expensive, lasting for several months or years. So people often wonder if there are ways to avoid probate.

Not everything in your estate has to go through probate. As we discuss in this article, there are ways to avoid having a probate court run your assets through the probate process.

Generally, these are the three categories of assets that won’t have to be probated: (1) assets placed in a trust, (2) jointly owned assets that transfer to the surviving joint owner, and (3) assets that have a valid beneficiary designation (typically insurance policies, retirement plans, etc.). 

The most common assets that go through probate are ones that are owned solely in the name of the deceased person. For example, real estate owned solely in the deceased’s name.

The probate process is well-defined by state laws, but many people seek to avoid it for several reasons: 

• Added hassle and stress: The last thing your family wants to deal with while grieving is added hassle and stress. The probate process can bring both.
  

• Added costs: Probate proceedings can be both expensive and time-consuming. Throughout the process, there are various costs such as attorney fees and court fees. These costs can be paid for through the estate, but this could mean a significant loss in what’s left to distribute among friends and family. 
  

• The process can be slow: Avoiding probate can allow for a quicker transfer of assets to beneficiaries. The probate process could drag on for years, meaning beneficiaries won’t receive any inheritance until the estate is out of probate.

• ‍Privacy concerns: Probate court proceedings eventually become public record. This gives others the ability to see the details of your estate such as the value of your assets and who inherited them. If you’d rather keep this information private, it’s best to keep your assets out of probate.

So if you’re asking yourself why avoid probate, think about how the probate process may impact your family once you’re gone.

Differences in state probate laws can lead to variations in the overall process and cost of probate depending on what state you’re in. In some states, probate laws may set limitations on the cost of probate court and attorney’s fees. 

State probate laws will also dictate when you can avoid probate entirely. If your estate is below a certain value, state probate laws may allow you to avoid probate altogether or to use a simplified version of the process. States like New York, Florida, Pennsylvania, Ohio and North Carolina all have different requirements for when probate can be avoided or shortened.

Fortunately, there are ways to avoid probate. Here are some of the estate planning tools you can use to keep your assets and property out of probate:

Now let’s look at each of these a bit more in-depth.

1. ‍Creating a living trust:  A living trust is a legal document that outlines where your assets will go upon death. With a living trust, your assets will be held and managed by a third party or “trustee.” These assets can include financial accounts, real estate, cars, or any other valuable personal property. After your death, the trustee will be able to swiftly transfer the trust assets to their named beneficiaries without the need for probate. Living trusts differ from wills because the management and distribution of your assets go into effect during your lifetime. 
2. ‍Naming beneficiaries on your financial accounts: Most states allow you to set up “payable on death” accounts for life insurance policies, retirement accounts, and bank accounts. This allows the bank or insurance provider to release the funds directly to the designated beneficiary without requiring probate. Some states even allow you to designate beneficiaries for cars and real estate property, allowing them to be transferable upon your death.
3. ‍Co-ownership of property: Holding property jointly allows the property to transfer directly to the surviving owner. During your lifetime, you can retitle a property deed to include a loved one whom you’d like to pass the ownership to after your death. ‍
4. Giving away gifts: Upon your death, any assets that are no longer in your possession do not require probate. Hence, giving away gifts can be an efficient way to avoid probate. If you take this route, be aware that a federal gift tax can apply to gifts valuing over $15,000.

The complexity of the probate process can differ case by case. A smaller estate may not even require probate, while a larger estate can lead to complex court proceedings. In either scenario, taking some of these estate planning steps can help minimize the time and money devoted to probate proceedings, which in turn lessens the burden of probate on friends and family.

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Other articles on probate

• What is probate?
• What is a probate lawyer?
• Seven questions to ask a probate lawyer
• Can a bank foreclose on a house in probate?