Tips to Avoid Probate
At Fullerton, Lemann, Schaefer & Dominick, LLP, our estate planning attorneys have extensive experience in the probate administration of estates for clients in Riverside and San Bernardino Counties and the Inland Empire Region of Southern California. Our trust and estate practice includes estate planning, administration, and litigation, giving us insight into the inconvenience and expense associated with the probate process. Probate avoidance is a legitimate goal of estate planning and should be considered along with other goals and objectives in developing a comprehensive estate plan.
Why avoid probate?
Probate is generally an expensive and time-consuming process for the distribution of an estate. Probate can take a year or more and costs tens of thousands of dollars or more in court costs and statutory fees. Another disadvantage of probate is lack of privacy; when an estate is probated, all of the assets become a matter of public record. If you wish to keep your financial affairs private, it is advisable to avoid probate administration.
Tips for Avoiding Probate
In general, an estate will require probate if it is valued at $100,000 or more, or if it contains real property (land, houses, buildings) valued at $30,000 or more. If your estate falls below the statutory threshold, then a full probate proceeding will most likely not be necessary. Below are some of the most popular methods of avoiding probate:
Trusts - Once a trust is created and properly funded, legal title to the asset transferred to the trust will pass to the trustee, who will manage the property for the benefit of the beneficiary, who holds equitable title. The person who created the trust, the grantor, no longer holds title to the asset, so it is no longer included in the grantor's estate for probate purposes. This is true for all types of trusts, whether or not the grantor is also the trustee, or even if the grantor is the beneficiary of the trust during the grantor's lifetime.
Insurance policies Insurance policies have beneficiary designations which control how the proceeds of a policy will be distributed, without the need for probate administration. It is important to ensure that you designate a contingent beneficiary as well as a primary beneficiary. If the named beneficiary is deceased and a contingent beneficiary is not named, probate may be required to determine who should receive the death benefit from the policy.
Retirement plans - Like insurance policies, most retirement benefit plans have beneficiary designations which control how these assets will be distributed on death. IRAs, 401(k)s, Keoghs, and other retirement and pension plans may be distributed to the decedent's spouse or other named beneficiary without passing through probate. Making maximum contributions to these funds is an excellent way to minimize taxes, provide for retirement, and avoid probate.
Jointly-titled property or community property with right of survivorship - When property is held in joint title, or in community property with right of survivorship (cpwrs), then upon the death of one property owner (or spouse, in the case of cpwrs) the full interest in the property belongs to the surviving co-owner or spouse, without the necessity of probate administration. Holding property jointly or as community property has certain legal implications in the event of a lawsuit or divorce, so be sure you consult with a knowledgeable attorney about your options before changing title to your property.
Jointly-held bank accounts Jointly-owned bank accounts will pass to the surviving co-owner outside of probate. Another type of bank account, called a Totten Trust, can be used by one person to transfer the balance of an account to a named beneficiary on the death of the depositor.
Seek Experienced Legal Representation
Probate avoidance is a worthy goal, but it should not be the only consideration when planning an estate. In estate planning, it is important to develop an overall strategy that takes into consideration several different factors. For professional advice and assistance with probate avoidance or other estate planning help, contact Fullerton, Lemann, Schaefer & Dominick, LLP for a consultation with one of our experienced probate lawyers.