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The Benefits of Avoiding Probate

February 22, 2024.

What are the benefits of avoiding probate? 

When you place assets into a will, your estate must pass through the probate process. Probate involves the sorting and administration of your estate under court supervision. While probate isn’t meant to be a horrible and complicated process, in some cases it can be a stressful and chaotic time for your family.

If you are among those wanting to avoid probate, here are four benefits to doing just that.

Avoiding Probate Can Save You Money

Probate can be a costly process. The amount of fees that your family will have to pay can add up quickly. This includes court costs, executor fees, attorney fees, accounting fees and even appraisal fees. Generally, your estate will cover these costs. However, the more probate expenses you have to cover, the less your beneficiaries will ultimately receive.

Avoiding Probate Can Save You Time

Probate can also last months, even years in some cases. Even if your executor is well-prepared, probate is a time-consuming process. Each asset in the estate must be assessed, valued, sorted and distributed. A large estate or multiple beneficiaries can draw out the process.

Other factors such as out-of-state beneficiaries, assets that require tax returns and estates with unusual or out-of-state assets can delay the probate process even more.

Avoiding Probate Can Keep the Process Private

The details of probate court proceedings become public record. That means that any documentation and information about your estate, your beneficiaries and what was inherited is available to the public at any time. Avoiding probate can allow you to keep the contents of your estate within the family and away from prying eyes.

Avoiding Probate Can Reduce Family Disputes

Since probate can be a long, stressful process, it can leave room for family disagreements and disputes. Beneficiaries might have hard feelings, or siblings might clash heads when it comes to their inheritances. A long probate period only gives unhappy family members time to start a fight or initiate litigation, which can further delay the process and add to the expenses.

Some Assets Automatically Avoid Probate

 

It’s important to note that some assets automatically avoid the probate process, some of which are listed below:

  1. Assets owned jointly. Sometimes called “joint tenancy,” any property owned with another person does not go through probate. Most commonly, joint ownership includes bank accounts and real estate, but it can also involve any other asset with a joint owner.
  2. Property owned by married couples. Surviving spouses automatically inherit assets without probate. In legalese, it’s called “tenancy by the entirety,”.  For example, if a husband passes away, the wife may automatically become the sole owner of the home.
  3. Beneficiary accounts. Any investment account that has a designated beneficiary skips the probate process. Beneficiary designations may even trump contradictory wishes in a will. This is why it’s critically important to regularly review and update beneficiaries on life insurance, IRAs, 401(k)s, pensions, and other retirement accounts.
  4. Transfer-On-Death (TOD) assets. Some states allow residents to use a transfer-on-death form to name beneficiaries for vehicles, securities, and real estate to avoid probate. Items such as cars, small boats, stocks, bonds, brokerage accounts, land, and houses may  qualify.
  5. Payable-On-Death bank accounts. Similar to the transfer-on-death assets, bank and credit union accounts can avoid probate and automatically transfer to a new owner with a payable-on-death form. See your financial institution to fill out the proper paperwork.
  6. Small Estates. In some states, if an estate is worth less than a certain amount, the family can transfer assets with a simple affidavit (a notarized written statement) and distribute property to heirs without probate. To determine the value of the estate, subtract any debts from the total value of assets. Legal fees and reasonable funeral expenses can also be deducted from the estate’s total.

How can I avoid probate?

If an asset does not automatically avoid the probate process, one of the most common ways to avoid it is by placing assets into a trust rather than a will. Trusts are extremely customizable and flexible to your specific needs.  To learn more about different types of trusts, please visit our blog.

 

Have Questions?  Contact Us!

References

SSP.  “What are the Benefits of Avoiding Probate”?  What are the benefits of avoiding probate? – Solomon, Steiner & Peck, Ltd. (ssandplaw.com).  February 22, 2024.

The information in this article is general in nature and for informational purposes only.  None of this information is intended to be personalized (and tailored to an individual’s unique circumstances) and should never be construed as specific tax, legal or financial recommendations.  Before making any financial decisions, you are strongly encouraged to first consult with a qualified financial professional.

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