When you think about estate planning, you likely focus on creating a plan for the distribution of your estate assets when you are gone. Although that may remain your primary estate planning goal, you will probably also include additional, related goals as your estate plan grows. A common goal found in many comprehensive estate plans is probate avoidance. In reality, it may be impossible to avoid probate entirely; however, with some careful planning, you can create an estate plan that dramatically reduces the amount of time and money spent on the probate of your estate. That, in turn, may make much needed assets available to loved ones much sooner after your death. The probate lawyers at Morris Law PLLC explain why probate is necessary and offer some common strategies for reducing an estate’s exposure to the probate process.
What Is Probate and Why Is It Necessary?
When a person dies, he or she leaves behind an estate that consists of all the assets the individual owned or had an ownership interest in at the time of death. This includes both real and personal property, including tangible personal property. Probate is the legal process that many of those assets must go through to transfer to the intended beneficiaries or legal heirs of the estate. In addition, probate serves to identify, locate, and value those assets as well as notify creditors of the estate and provide them with the opportunity to file claims against the estate. If a Last Will and Testament was executed by the decedent prior to death, probate also authenticates the Will, or in the alternatives, provides the legal forum for contesting the authenticity of the Will. Finally, probate ensures that any state and/or federal gift and estate taxes owed by the estate are paid.
What Can Probate Lawyers Do to Help My Estate Avoid Probate?
Although it may be impossible to avoid probate entirely, there are several estate planning tools and strategies that can dramatically decrease the amount of time and money spent on the probate of your estate. The time and expense of formal probate are the primary reason why probate avoidance is a common estate planning goal. Probate is also public. Formal probate can take months, even years, to reach a conclusion. Probate assets remain out of the reach of the intended beneficiaries while probate is open, meaning the beneficiaries cannot benefit from the use of the asset until probate is finished. In addition, there are a number of expenses related to the probate process, and they typically increase the longer probate takes to reach a conclusion. Everyone involved in the probate process is entitled to a fee, including the Executor, estate planning attorney, appraisers, real estate agents, and accountants. The time and money expended during probate create a huge incentive to include probate avoidance as an estate planning goal.
In general, the key to minimizing the time your estate spends in probate is to reduce the number of probate assets in your estate. Not all assets are required to go through the probate process. Non-probate assets bypass probate and can, therefore, be distributed to the intended beneficiaries immediately following your death. Some commonly used non-probate assets include:
- Qualifying for a small estate alternative – most states, including Arizona, offer an alternative to formal probate for small estates that qualify. Typically, the estate’s value must be below a designated amount and the estate may have to meet additional eligibility criteria, such as no real property or the agreement of all heirs of the estate.
- Trust assets – assets held in a trust bypass probate. For this reason, people often choose to use a trust agreement as their primary estate planning document for distributing assets after death. Using a trust has the added benefit of confidentiality because while your Will is a matter of public record once admitted to probate, a trust agreement is not.
- Life insurance proceeds – proceeds from a life insurance policy are not part of the probate process and are therefore, paid out immediately to the beneficiary.
- Jointly owned property – co-owned property, of held jointly with rights of survivorship, can be an excellent probate avoidance technique. Upon the death of one owner, that owner’s interest in the property is automatically transferred to the survivor(s).
- Beneficiary Designations – many assets, such as case or investment accounts, allow a “payable on death” or “transferable on death” beneficiary designation. This allows the interest on the asset to be transferred outside of probate.
Contact Arizona Probate Lawyers
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about probate avoidance, contact the experienced Arizona probate lawyers at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.
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