Probate avoidance is one of the most common topics an estate planning attorney addresses.
Probate is the court-supervised process through which a deceased person’s assets are administered and distributed to their heirs or beneficiaries. It often involves an application to administer the estate, formal notice to next of kin and/or beneficiaries, preparation of an inventory of the assets, and the preparation of a final account of the estate’s activity. While there are some circumstances when probate may be preferred, most individuals prefer avoiding the process altogether.
I want to highlight a few of the specific benefits of avoiding probate. Probate can be a lengthy and costly process, but there are significant advantages to implementing strategies to bypass or minimize it.
BENEFITS
Time Savings: Probate proceedings can often take several months or even years to complete. By utilizing the strategies discussed below, individuals can streamline the transfer of assets to beneficiaries, saving time and minimizing delays in distributing inheritances.
Cost Reduction: Probate involves various fees, including court costs, attorney fees, and executor fees, which can significantly diminish the value of an estate. By avoiding probate, individuals can reduce or eliminate these expenses, preserving more of their assets for their beneficiaries.
Privacy Protection: Probate proceedings are a matter of public record, meaning that details of an individual’s assets, debts, and beneficiaries become accessible to the public. By utilizing probate avoidance strategies, individuals can maintain privacy regarding their estate and beneficiaries.
Flexibility in Asset Distribution: Probate can be a rigid process governed by state and local rules, which may not always align with an individual’s wishes for asset distribution. By implementing a trust to avoid probate, individuals can exert greater control over how and when their assets are distributed and ensure that their specific wishes are carried out.
Expedited Access to Assets: Assets tied up in probate may be inaccessible to beneficiaries until the probate process is complete. This can cause financial hardship, especially if beneficiaries rely on those assets for their living expenses. By avoiding probate, beneficiaries can gain quicker access to assets, providing financial stability during a challenging time.
The following strategies should be considered to avoid or minimize the need for probate upon an individual’s passing. Probate can be a time-consuming and costly process, and these strategies can help streamline the transfer of assets to beneficiaries.
STRATEGIES
Revocable Trusts: One of the most comprehensive options is to create a revocable trust. One may transfer ownership of assets such as real estate, financial accounts, and investments to the trust while living. Upon their passing, the assets held in the trust can be held and/or distributed to beneficiaries without being subject to the probate administration process.
Transfer on Death (TOD) Designations: Many financial assets, such as bank accounts, brokerage accounts, and certain securities, allow account holders to designate beneficiaries who will receive the assets upon passing. By completing a TOD designation form, individuals can ensure that these assets transfer directly to beneficiaries outside of probate. In addition, individuals owning real estate in Ohio may designate a beneficiary of the property via transfer on death designation.
Beneficiary Designations: Similar to TOD designations, certain assets, such as life insurance policies, retirement accounts (e.g., 401(k)s, IRAs), and annuities, allow individuals to name beneficiaries who will receive the proceeds upon their passing.
Joint Ownership with Rights of Survivorship: Holding property or accounts jointly with rights of survivorship means that upon the passing of one owner, the surviving owner(s) automatically inherit the deceased owner’s share. This can apply to real estate, bank accounts, and other assets, allowing them to pass outside the probate administration process.
Business Agreements: Operating Agreements, Closed Corporation Agreements, and Buy-Sell Agreements may stipulate how a deceased owner’s share of the business will be transferred following their death. These agreements ensure that the business continues to operate smoothly after the death of an owner and provides a plan for the orderly transfer of ownership outside the probate process.
Gifting: Individuals can gift assets during their lifetime to intended beneficiaries. By gifting assets before passing, individuals can reduce the size of their estate and potentially minimize estate taxes. However, it’s essential to consider gift and income tax implications and consult with a professional before making significant gifts.
It’s essential for individuals to carefully consider their unique circumstances and consult with legal and financial professionals when implementing estate planning strategies. While these methods can help avoid probate, they may not be appropriate for everyone, and proper planning is essential to ensure that assets are transferred according to one’s wishes.
Contact Max Trubiano at 216-621-7860 if you have any questions or would like to discuss implementing these strategies.