Avoiding Probate: Creative Estate Planning Strategies for Minimizing Probate Costs and Delays

Probate refers to settling a deceased person’s estate, including transferring assets to the rightful heirs and paying debts. This can take anywhere from several months to years, depending on the complexity of your estate plan and any disputes among beneficiaries or creditors.

In addition to time and cost, probate also involves a lot of paperwork. Due to the vast paperwork, lawyer fees also increase. Data shows that one-third of probates are settled with lawyer fees of $2,500 or below in the US.

Understanding Probate

You may be wondering what exactly probate is. Probate is the process of administering an estate and dealing with its assets. It’s necessary when a person dies without having left behind a will or if their will does not cover all their assets.

Probate may be unnecessary if a will covers all the deceased person’s property. Instead, you can simply carry out your loved one’s wishes by distributing their assets according to their wishes.

However, suppose there isn’t such a document in place. In that case, probate becomes necessary because only through this legal process can you distribute assets according to state law while avoiding any possible tax consequences on those assets before they are passed down to beneficiaries specified by your loved one during your lifetime.

How the probate takes place depends on your location. According to an article from the U.S. News & World Report, every US state has a different probate code, and Colorado has a small probate process for estates under $70,000.

Importance of Estate Planning

Probate is a lengthy and expensive process that can delay your estate’s distribution for years. In fact, in some cases, it can take more than five years for an estate to be settled. This can be especially harmful to beneficiaries waiting on the money from their inheritance or those who need funds from the estate immediately.

To avoid these problems, you and your family must understand why estate planning is essential and what documents should be created during this process. The sad part is that many Americans don’t have a will ready despite recognizing its importance. Per a Gallup report, only 46% of Americans have a will, which may otherwise have simplified the inheritance and property transfer process.

To avoid probate, the best way is to connect with an estate planning firm. You can find one with some online research. Usually, connecting with such firms is straightforward. For instance, New View Estate Planning is a Tulsa-based estate planning firm with a contact number for anyone to easily connect with the lawyer.

New View Estate Planning also has a self-service portal that lets clients take matters into their own hands. The point is that no matter how long the process is, finding help has become easy in today’s digital world. After connecting with a lawyer or estate planning firm, you can follow many strategies to avoid probate.

Strategies for Avoiding Probate

There are several ways to avoid probate. The most common is through an estate plan, including a revocable living trust, beneficiary designations, and joint ownership of assets. For example, if you own real estate in California or elsewhere that’s titled in your name alone, you may be able to transfer it directly to the person who will live there after your death.

Here are some strategies you can use for estate planning to prevent probate.

Revocable Living Trusts

Revocable Living Trusts are designed to avoid probate. When you create a revocable living trust, you transfer the title to your property into the name of this private document that directs the distribution of your estate after death. The benefit of using a revocable living trust is that it avoids probate because it’s not part of that process.

If you choose this option, update all beneficiary designations on any financial accounts and other documents related to real estate holdings. Hence, they reflect ownership by spouses/partners or individuals with heirs named as contingent beneficiaries rather than “John Doe” or “Jane Doe.”

Beneficiary Designations

Beneficiary designations are a great way to avoid probate. They’re also very easy to set up and change, meaning you can use them to your advantage when planning your estate.

In most cases, beneficiary designations are not considered wills by the courts, but they can be used in conjunction with wills or other estate planning strategies to ensure that your assets pass directly into the hands of those who care about you most. Here’s how it works:

●        Beneficiary designations allow you to name an individual or organization as the beneficiary of all of an account held at a financial institution such as a bank or brokerage firm.

●        If there is no will, these accounts will go through probate before being distributed according to established state law. However, if there is both a valid will and designated beneficiaries for any given asset type, those named individuals/organizations would receive whatever portion specified in the document, saving time and money.

Joint Ownership

Joint ownership is a way to pass assets to beneficiaries without probate. It can be used for:

●        Real estate, bank accounts, and investments

●        Personal property

●        Jewelry

●        Tangible personal property designated by you as joint with right of survivorship (JWROS).

For your plan to work effectively with joint ownership, it must be drafted carefully to meet all legal requirements.

Small Estate Affidavits

A small estate affidavit is a document that allows you to transfer property without going through probate. It’s a legal document that allows you to avoid probate and effectively transfers only a small amount of property. A small estate affidavit is ineffective in transferring real estate, so this strategy isn’t suitable if you have significant assets or real estate holdings.

A small estate affidavit can help minimize the time and expense associated with opening up an estate when there are no creditors involved with your death, meaning there aren’t any debts owed by the deceased person at the time of death. The value of their remaining assets does not exceed $50K in total. The charge for filing SEA is a few 100 dollars.

Choosing the Right Strategy

Choosing the right strategy depends on the size of your estate. If you have a smaller estate and want to avoid probate, just one strategy may be right. On the other hand, choosing wisely becomes even more critical if you have a more significant estate and want to use more than one strategy.

In general:

●        If no spouse or minor children are involved in your plan, then any type of trust can be used as long as it meets all state requirements.

●        If little children are involved in your plan, then using joint ownership property titles such as tenancy by entirety or joint tenants with rights of survivorship would not work because those types of ownership titles do not pass automatically upon death as other types do. Instead, they require probate court approval before being transferred into new hands.

Conclusion

Probate is a costly and time-consuming process that can be avoided with the right estate planning strategy. There are many ways to reduce your chances of going through probate, but they all have pros and cons. Choosing wisely based on your situation is essential so that you won’t regret it later on in life when it comes time for you or someone else in your family to inherit an estate.