Understanding Probate and How to Avoid It: A Comprehensive Guide

Probate is the legal process that occurs after someone passes away, involving the transfer of their property, such as real estate, to their heirs. This process can typically take anywhere from eight to twelve months. Even if you have a will or live in a state that offers an accelerated probate process, your assets may still go through probate depending on how they are structured. This can be a challenging time for your loved ones, especially if the process drags on, bank accounts are tied up, or housing is in question. However, with proper planning, you may be able to avoid probate altogether. Here are five tips to consider.

Consider the Size of Your Estate

Typically, only large or complex estates go through the formal probate process. Many states have probate exemption levels and offer accelerated probate for estates under a certain size. Under the Uniform Probate Code, 18 states allow for an informal probate process as long as no one contests the will.

Understanding your state’s limits for probate is an important part of estate planning. It’s also a good idea to be clear on what your state counts toward the value of your estate. For example, some states don’t consider payable-on-death accounts, vehicles, or real estate located in another state when determining the size of your estate.

In some states, there may be no upper estate limit. These states often grant small estate status if the value of the estate will be used to cover certain high-priority debts, like medical costs or funeral and burial expenses.

Create an Estate Plan

Even if your finances and estate seem simple, consulting with an estate planning attorney can help you determine the best approach to keeping your assets out of probate. You’ll have to pay for legal counsel, but an estate planning attorney will ensure your assets are distributed in the manner you desire.

Assets may include your cash savings, real estate, stocks and bonds, retirement funds, and life insurance benefits. If you have items of significant value, like rare collectibles or artwork, these can also be included in your legal documents. Legal counsel also typically sets up an estate plan that’s designed to minimize the impact taxes can have on your assets before or after your beneficiaries inherit them.

Set Up Joint Ownership

If you want to make sure that your home or other property goes to your partner after you pass, both of your names need to be on the deed. Spouses often own their real estate jointly, which means that ownership passes to the surviving owner and there’s no need for probate. This can also be the case for unmarried partners (or anyone that owns property together) as long as both names are on the deed.

But if you’re the only one listed on the deed, transferring ownership while you’re still alive can help your partner avoid probate. You can also grant joint ownership of your property to a beneficiary of your choice, such as a child or relative. To avoid any disputes, you’ll also want to make sure that the deed to your home is titled correctly.

Create a Living Trust

A living trust is another option to prevent your assets from ending up in probate after you die. A living trust is a legal entity that allows you to designate beneficiaries who will receive your assets after you die. You can choose to leave your assets to a person, a group of people, or even an organization.

As the grantor of the trust fund, you’ll be able to set it up and create rules for how the assets within your trust fund are managed, accumulated, and distributed. But you’ll need a trustee to manage the trust fund. Trustees are third parties that have a fiduciary duty to act in your beneficiaries’ best interests within the terms set for the trust. You can designate anyone to be your living trust’s trustee, or you can choose to use a firm.

Living trusts are commonly used to pass on assets without having to go through the probate process. But you typically still need a will, particularly for assets not included in the trust.

Designate a Beneficiary

In some states, you can deed your real estate or vehicle to a specified beneficiary after you die, such as a spouse or child. This is known as a transfer-on-death beneficiary, but may be called a beneficiary deed, depending on the state where you live.

You can designate beneficiaries for certain types of bank accounts, such as your savings account. To do this, you’ll need to decide who will receive the money in your account after you die. Having a payable-on-death (POD) account not only helps avoid probate but can help your loved ones get access to cash to settle your estate.

Do Wills Help Avoid Probate?

A will, formally known as a last will and testament, is a legal document that spells out what you want to happen to your property after you pass away. If you have children or other dependents, your will can also be used to designate who will care for them.

But having a will doesn’t help you avoid probate—although it can speed up the process. After you die, a probate court will confirm that the will is legitimate. The court will also provide authorization to the individual you named as executor to carry out their duties and make sure any necessary taxes are collected. If the court determines that your will is invalid, distribution of your estate will be handled by a court-appointed administrator.

Although having a will won’t help you avoid probate, dying without a will, sometimes called dying intestate, makes the probate process even more complicated and lengthy. The court will distribute your estate, including your real estate and money. Typically, your assets will be given to your spouse and children, or other living relatives. But when you don’t have any family, the state will take ownership of your estate.

The Bottom Line

If your estate goes into probate after you pass away, it could cause delays in the distribution of your assets. If your family is relying on the resources you wanted them to have after your death, it could cause even more headaches such as trouble paying your final expenses and covering their bills, potentially damaging their credit.

While a will is a good start to simplify the probate process, to avoid probate altogether, consider transferring assets while you’re still alive, creating a living trust, or designating beneficiaries on certain types of accounts. Meeting with an estate planning attorney can help you figure out the best options for you and your loved ones.

At O1ne Mortgage, we understand the importance of planning for the future. If you need assistance with any mortgage services, don’t hesitate to call us at 213-732-3074. Our team of experts is here to help you navigate the complexities of estate planning and ensure your loved ones are taken care of.