You have probably heard that avoiding probate is a common estate planning goal, but how do you go about making sure your own estate avoids probate? It is not always possible to completely avoid probate; however, careful planning can significantly decrease – if not completely avoid – your estate’s exposure to formal probate after you are gone. A Murfreesboro probate attorney at Bennett, Michael & Hornsby explains how your estate can avoid probate.
What Is Probate and Why Should My Estate Avoid It?
When you die, you will leave behind an estate that is made up of all the assets you owned at the time of your death. Probate is the legal process that eventually transfers those assets to the intended beneficiaries and/or legal heirs of your estate. Probate also serves several other important functions, including:
- Authenticating your Last Will and Testament
- Identifying, securing, and valuing estate assets
- Notifying creditors and allowing them to file claims against the estate
- Litigating any challenges to the Will or claims against the estate
- Ensuring that all taxes are paid
Formal probate can be a costly and time-consuming process that can prevent loved ones from accessing much-needed assets and dimmish the value of the estate that is finally transferred to those loved ones. Probate is also a very public process that some people prefer to avoid. For all these reasons, probate avoidance is a common estate planning goal.
Tools and Strategies to Help Your Estate Avoid Probate
Reducing the size, value, and complexity of the probate estate you leave behind is the best way to avoid probate given that most states offer a small estate alternative to formal probate for estates of modest value and uncomplicated assets. That requires you to understand the difference between “probate” and “non-probate” assets because non-probate assets bypass probate altogether. Several estate planning tools and strategies used to reduce the size and value of your probate estate include:
- Gifting while you are alive. Only assets owned by you at the time of your death can be held up in the probate of your estate. One way to reduce the size of your probate estate, therefore, is to gift assets while you are still alive. Not only will that help your estate avoid probate, but you can enjoy the gift while you are still here, and you may be entitled to tax benefits that will apply while you are alive and after you are gone.
- Relying on a trust to distribute assets. Although your original estate plan probably relied on a Last Will and Testament to distribute your assets, you may now wish to consider using a trust to distribute most of those assets. Assets held by a trust are non-probate assets, meaning they will bypass the probate process and can be distributed to beneficiaries as soon after your death as you wish. That same trust will keep the details of your estate distribution private and can allow you to stagger the distribution of a moderate to large inheritance.
- Choosing the best way to title jointly owned property. The way co-owned assets are titled can also be used to avoid probate. Your interest in your house, for example, could transfer directly to a spouse or adult child after your death if titled properly. Holding the title jointly with rights of survivorship, allows your interest in the property to pass directly to the co-owner upon your death without first going through probate. When held using a different form of joint ownership, however, that same interest becomes part of your probate estate instead of transferring automatically.
- Designating financial accounts as “Payable on death (POD)” or “Transfer on death (TOD).” Assets held in a financial account, when designated as POD or TOD, will automatically become the property of the designated beneficiary upon your death; however, the beneficiary has no legal rights to the assets while you are alive.
- Depending on life insurance proceeds. Life insurance proceeds are non-probate assets and, therefore, are paid out directly to the beneficiary after your death. You can even make a trust the beneficiary of your life insurance policy so that the proceeds pay out directly to the trust upon your death.
Contact a Murfreesboro Probate Attorney
If you have additional questions or concerns regarding how to avoid probate, consult with an experienced Murfreesboro estate planning attorney at Bennett, Michael & Hornsby as soon as possible. Contact the team today by calling 615-898-1560 to schedule your appointment.