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How To Avoid Probate Court: 5 Legal Strategies To Keep Your Estate Private After Death

Scott Steinberg5-minute read

March 01, 2021

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Probate is a legal procedure that occurs upon a person’s death in which a court oversees the distribution of their property and appoints a representative to ensure that any outstanding debts are paid in full. A probate court will follow instructions outlined in a will that’s legally compliant with state requirements or distribute property to the next of kin in the event that no will exists.

However, the presence of a will alone does not prevent probate from occurring, and the process of probate can take a considerable amount of time and come at significant expense. It may also result in making the deceased’s finances a matter of public record. On the bright side, learning how to avoid probate can be as simple as employing a few straightforward legal strategies. Simply read on to find out more.

How Can My Estate Avoid Probate?

By avoiding probate, you can ensure that your descendants keep their financial affairs private, and minimize the cost, time, and headaches associated with the transfer of assets to your heirs. Some strategies to consider if you wish to avoid probate court include:

  1. Transfer Property to Revocable Trusts
  2. Reduce Your Estate
  3. Create A Will
  4. Name Beneficiaries
  5. Take Advantage of Joint Ownership

What Is Probate?

In simple terms, probate is a public court process that examines the contents of an estate and then distributes them, either in accordance with a will or by operation of law. But the process of working with a probate court can often take anywhere from 6 or 7 months to as much as 2 years to conclude – and come with myriad expenses from attorney’s fees to publication charges and filing fees attached.

Likewise, a probate court will also make a departed individual’s personal finances a matter of public record, and publicly share information about outstanding holdings and debts, as well as the value and type of assets that they held. Noting this, many people would prefer to avoid the public airing of their estate and employ a range of legal tactics to avoid it.

Why Is Avoiding Probate Court A Good Thing?

In addition to helping you cut expenses, avoiding probate court can also help you and your deceased kin benefit in several ways.

 

Privacy

Most people won’t want their finances, or those of their heirs, to be made public, even in death, especially in relation to large outstanding debts or inheritances. Avoiding probate can help you keep sensitive personal financial matters private.

 

Cost

Several costs such as filing fees, newspaper publishing fees, and attorney’s fees, as well as various other outstanding items, are also associated with probate court, and can quickly add up. Again – avoiding probate allows you to keep more money in your pocket. Note that even more expenses can be accrued if a will is not in place.

 

Time To Settlement

Courts move slowly and carefully to ensure that estates are properly distributed, and debts handled. However, this can be a distinct disadvantage for your heirs if they’re dependent on the financial windfall that the estate stands to provide.

5 Strategies To Avoid Probate

Happily, the law allows for the legal transfer of property in several ways that can help you avoid probate court. For example, spouses can leave each other their entire estates without triggering the probate process, although transfers to other parties need to be arranged before death or upon the death of the surviving spouse.

Transfer Property To Revocable Trusts

A revocable trust, also known as a living trust, allows owners to retain control over property during their lifetime, with the property passing to the trust’s designated beneficiary at the time of their death. It’s often a preferred choice for those with sizable estates that will be left behind, or if a large number of beneficiaries stand to inherit. A living trust is called a revocable trust because you also have the opportunity to revoke it at any time.

To create one, you’ll need to work with an attorney to execute a document that establishes it. At this time, a separate legal entity (the trust) is created, and all property transferred to it. If you should happen to pass away, an individual that you have designated as a trustee will handle the distribution of property to the trust’s designated beneficiaries. Note that if you are planning for the well-being of dependents with special needs, you may wish to consider establishing a special needs trust instead.

Reduce Your Estate

You can also give away property during your lifetime as a way to make your estate smaller. However, while doing so can minimize tax burdens and public scrutiny, don’t forget. It also means giving up control over these real estate holdings.

 

Benefits Of Gifting Property

In addition to removing property from your estate and keeping it out of probate, there can also be significant emotional benefits to passing your real estate holdings along to loved ones or family friends. That’s because these properties may make a significant impact on their living situation, financial portfolio, and overall well-being or quality of life.

 

Drawbacks Of Gifting Property

Of course, if you do decide to gift valuable property, in addition to giving up control, you may also trigger gift taxes or IRS reporting requirements, just as you would when gifting stocks and real estate. Keep in mind that IRS rules generally apply to gifts of $15,000 per individual or $30,000 per couple.

Create A Will

Creating a will that explains how your possessions are to be distributed, and to whom they’ll go, does not prevent a property from entering probate. However, it can help speed up the process significantly, and greatly reduce costs as compared to dying intestate (without a will in place).

Name Beneficiaries

Many types of assets, particularly savings, investment, or retirement accounts and life insurance policies, ask you to name beneficiaries. Also known as payment on death or transfer on death assets, upon the passing of the owner, ownership is automatically transferred to the named beneficiaries.

Take Advantage of Joint Ownership

In addition, you can also avoid probate on property that involves joint tenancy with rights of survivorship (JWTROS). In effect, if one of the two current owners passes away, upon their death, title to the property automatically passes onto the surviving owner.

This process happens automatically between spouses, but a surviving spouse may also want to consider making a child or several children joint owners so that ownership immediately passes to them upon the death of the surviving spouse. Be advised though that making a child a JWTROS constitutes a gift in the eyes of the law, which may trigger the gift tax situation mentioned above.

In essence, different types of property (real estate, boats, cars, equities, financial securities, etc.) can be held jointly – many of these items must have a title document (as with real estate) that indicates this joint ownership, though.

Estate Planning Involves More Than Tax Avoidance

Engaging in the process of estate planning won’t just help you avoid probate. It can also help you and your heirs create a working plan for the future – and put solutions in place that can help you protect your inheritors’ privacy and financial health, long after your passing. To learn more about probate, be sure to stop by our Learning Center.

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Scott Steinberg

Hailed as The Master of Innovation by Fortune magazine, and World’s Leading Business Strategist, award-winning professional speaker Scott Steinberg is among today’s best-known trends experts and futurists. A strategic adviser to four-star generals and a who’s-who of Fortune 500s, he’s the bestselling author of 14 books including Make Change Work for You and FAST >> FORWARD. The CEO of BIZDEV: The Intl. Association for Business Development and Strategic Planning™, his website is www.AKeynoteSpeaker.com.