Probate Avoidance

Death is inevitable but probate is not. This month’s column will explore what probate is and how to avoid it.

What is Probate? Probate is a public lawsuit processed through the court system available to view by all who are curious, a court-supervised administration of debts and assets of a decedent (dead person). Each state has its own laws and procedures for probate, but most share several common elements. Judicial review of a will to be sure it was prepared in a legally sufficient manner; inventory of all assets and creditors; publishing a newspaper “Notice to Creditors” so creditors can file claims against estate assets; orderly prioritization of claims for payment; and accounting of assets and expenses of administration. Finally, there is the distribution of remaining assets to beneficiaries according to instructions in the will (or if no will, pursuant to state laws of intestate succession).

Why Avoid Probate? It is expensive. Florida requires an attorney’s participation, and we know that attorneys cost money. Per statute, a reasonable fee for a simple probate is up to 3% of the value of all assets being administered. It is time consuming. Most probates often take 8 to 16 months during which time bank accounts are frozen, and assets may not be sold or distributed without permission from the Court. Add minor children, ownership of a business, substantial creditor claims, or unhappy beneficiaries, and these timeframes can easily double.

How to Avoid Probate? If you have a simple straightforward plan to distribute assets after death, you can avoid probate by titling your assets so that they transfer automatically upon your death. Owning assets jointly with others, or with “TOD” (transfer on death) designations can avoid the need for probate. Also, being sure that insurance and retirement assets have beneficiaries and successor beneficiaries named is key.

When probate avoidance alone is not sufficient to address your planning objectives, a revocable living trust (RLT) may be the right solution. Situations, such as with blended families, young or immature beneficiaries, or where concerns about creditors or remarriages require a more nuanced management of things after death, an RLT offers an excellent solution. These challenges can be addressed while also avoiding probate. Creating an RLT is more complex and therefore more expensive than just creating a will but offers enormous benefits in addition to saving the costs and length of the probate process. Not only can probate be avoided, but assets can be transferred in a way so that the beneficiary’s creditors, or divorcing spouse, cannot access the inherited assets. The RLT is also a perfect vehicle to manage assets for the benefit of young children or grandchildren, or to keep the management of an ongoing business in the control of chosen and experienced hands.

Meet with an experienced attorney who specializes in estate planning. Share your goals and concerns with the attorney. Listen carefully to the choices and solutions offered. Make a plan that is right for you.

Life can change in an instant. What are you waiting for?