One of the biggest reasons people conduct estate planning is for avoiding probate court and to care for their loved ones. More than any physical object, it is the best possible way to ease your family to the reality of life without you. Undertaking estate planning with the guidance of a legal professional is the best way to see to the needs of disabled or elderly family members, allow for the smooth transition of funds in times of need, and ensure your end of life documents are valid.
Avoiding Probate With Estate Planning
Many avoid “estate planning” because, due to the name, it sounds as if it’s only for the wealthy. However, if you own just one car, just one bank account, or even a collection of Beanie Babies, you have assets. Your assets are what comprise your estate. That estate can become a burden, however, if you have not clearly and legally delineated how you’d like to see these assets distributed.
When you decide to undertake estate planning, it’s important to communicate with your inheritors to make your intentions clear. They will also likely appreciate your solicitation of their input on how assets are to be distributed. By including them in these discussions, you will gather important information about their wishes while allowing them to participate in the estate planning process.
Even after your initial estate planning, the best way to avoid probate is to revisit your documents on a regular basis, especially after family changes, an interstate move, or shifting of assets, such as sale of a business. All of these can invalidate your careful estate planning and invite the probate process.
It’s also vital to become familiar with the laws of your state. Benefits paid by insurance policies are not subject to probate. Some stipulate that assets must be worth a certain amount before they go to probate. Others simplify the process of leaving property to a spouse.
What’s Probate & Why Should I Avoid It?
Probate is the process by which a person’s assets are taken control of and distributed by the state. It’s either overseen by a specific court or a division of a district court. Probate takes place when the validity of a person’s will is in question for any reason. Sometimes, it involves settling the ownership of the assets of the deceased. Probate can involve appraising real estate and other items such as boats or artwork, balanced against any outstanding debts or back taxes.
Depending on the state in which the probate takes place and the complexity of the deceased’s finances, the process can take from a few weeks to over a year. It can be costly, especially at a time when loved ones and family members cannot access funds or salable assets. Court costs, taxes, and other fees will be deducted from the estate at the end of the process.
If the person who has died did not leave a will at all, assets will be gathered, assessed, and distributed according to state law. This means that sometimes spouses and children will receive the estate, but sometimes not. If the deceased’s unstated intent was to leave money or personal items to charities or non-relatives, chances are slim that this will take place.
Distributing Assets Early
One way to avoid probate is to allot money and physical objects to loved ones before death. Some might do so when they become seriously ill, and others assume they will have this same opportunity, but this is not always the case.
This is the juncture at which conversations with loved ones and family members becomes perhaps the most important part of estate planning. Honest communication with children, grandchildren, and good friends is necessary to determine who might like which of your personal items. You may be surprised by what you thought you knew or assumed about those closest to you; for example, you might have thought an eldest child would happily become an executor, but he or she may not want this responsibility. Or, you might learn that family members have objections to the charity you have chosen to receive a percentage of your estate.
Some people decide to distribute personal items, such as vacation properties or artwork, long before their death. They do so for several reasons. Some wish to ensure that their possessions reach their intended recipients. Others are eager to see their loved ones enjoy shared or complete ownership of family heirlooms or cherished items while they are still alive.
Considering Living Trusts
However, some people are reluctant to distribute cash, stocks, or other financial assets before their deaths because they fear they may need it for future medical or long-term treatment. Others are already suffering from disabilities or other chronic conditions and want to ensure their care for as long as possible. Still more people are simply enjoying a well-earned retirement and wish to travel or pursue a hobby. Grandparents or parents may want to leave assets to grandchildren or children, but they may be minors or not mature enough to budget and steward a lump sum or valuable stocks. What, then is the solution for all of these scenarios?
A popular option is creating a living trust. Living trusts are documents which legally hold the assets of a person who is still alive (the grantor). The trust names a trustee, or the person who will manage these assets. Often, the trustee and the grantor is the same person. Many name another trustee to make business and personal decisions on behalf of the grantor in the event of incapacitation.
The grantor may then live life as he or she normally would. When he or she dies, the trust dissolves, and the assets are distributed according to the grantor’s wishes. Living trusts help to prevent the state in which you live from seizing your assets either in the event of incapacitation or death. The form of trusts which are changeable while the grantor is still alive is called a “revocable trust.”