Many people want to avoid a potentially costly and lengthy probate process for the beneficiaries of their estate, but don’t want to create a trust, transfer assets, and manage the trust. Often a client will come in with their elderly parent wanting to know how they can inherit quickly and efficiently, i.e. without probating the assets. Probate can be avoided with the careful planning of an estate, but can it be avoided without a trust?
Yes, but…
it depends on the assets held by the individual at the time of their death. An estate planning attorney should be consulted to determine the best way to accomplish this. First, let me be clear that a will does not avoid probate! A will does not avoid probate!
One way to have an asset pass directly to the beneficiaries is to designate the beneficiary on the account. Assets with named beneficiaries will pass directly to the beneficiary outside of probate. This is not a one size fits all solution and there are some pitfalls. For example, you may have 3 children, but you can only name two beneficiaries on your account. Additionally, designating beneficiaries may not work if wish to leave a specific amount of money to certain people.
You may be inclined to designate one beneficiary on all of your account(s) and leave that individual with specific instructions as to what to do with the money that will pass to them. This is not a good way to avoid probate. Once you die, that money passes to the beneficiary and he or she will own it outright, meaning it is never an estate asset and is not governed by a will. There is nothing compelling that beneficiary to do anything with the money other than keep it. Additionally, depending on the amount of money passing to the beneficiary, there could be adverse tax consequences if the beneficiary decides to make further distributions which would be considered gifts from the beneficiary.
Another way to avoid probate is to ensure that you have the proper documents in place for your business(es). Finally, if you own real property, you’ll want to ensure that you have the proper language within your deed to ensure a smooth transfer upon your death, but be careful with homestead issues, joint ownership, and outstanding mortgages.
If you want a personalized plan for avoiding probate, schedule an appointment now!
Disclaimer: This website and blog contain general information which is not intended to be specific legal advice. If you need specific legal advice, please seek advice from a licensed attorney in your state. Nothing contained on this website or blog is intended to create an attorney-client relationship.
