People often express their desire to avoid probate. But first, what is probate?
Probate is a legal process that occurs after a person dies. It usually involves going to probate court, where a judge determines if a will (if it exists) is valid, assesses the deceased person’s assets and if debts need to be paid, and finally approves distribution of the estate. See our FAQ section for more information about probate generally.
So why does almost everyone want to avoid probate? First, it can be expensive. For an estate valued at $500,000 in California, for example, the executor and attorney handling the probate each receive a statutory or minimum fee of $13,000. For an estate valued at $1,000,000, the statutory fee is $23,000 each. Second, probate can be time consuming. It is common for the entire probate process to take at least a year before any assets can be distributed to the beneficiaries.
So, how do you avoid probate? Common ways include:
1) Joint Tenancy
Holding your assets in a form of joint ownership, like joint tenancy, can avoid probate. If you hold your bank account in joint tenancy, for example, upon your death, it will pass automatically to the other joint tenant on the account. Therefore, it will not be in your probate estate. If you and the joint tenant died at the same time, however, then the asset will likely be probated.
Warning: Despite the simplicity of joint tenancy ownership, we do not recommend holding real estate in joint tenancy with anyone other than a spouse. There can be significant, and sometimes catastrophic, repercussions.
2) Beneficiary Designations
If you have beneficiaries listed on your savings or retirements accounts, these accounts will automatically pass to your beneficiaries upon your death. Therefore, the accounts are not included in your probate estate, so long as your beneficiaries survive you.
3) Revocable Living Trust
If you have a revocable living trust, you can maintain control over all of your assets while you are alive, but your assets are not in your probate estate when you pass away. Therefore, when you die, the trustee can distribute your estate without ever having to go to court.
Although this may sound like a daunting task for a trustee, our office specializes in Trust Administration and can assist trustees throughout the entire process. Many people prefer this alternative to probate because it can be less expensive and beneficiaries can often receive their distribution far more quickly.
Although staying away from probate usually sounds like a good idea, keep in mind that avoiding probate should not necessarily be the only thing that you are concerned about. Our office takes into account various factors including estate tax consequences, for example, to help you decide what type of estate plan works best for you. If you have questions, please give us a call.
By Courtney A. Martin, Esq.
Law Offices of James F. Miller, P.C.