You may hear people talk about probate avoidance when the topic of estate planning is casually discussed. This is the legal process of estate administration, and it will enter the picture when personally held assets are being transferred through the terms of a will.
In New York, the Surrogate’s Court handles probate matters, and this court provides supervision during the administration process when people pass away without wills or trusts.
Probate serves some purposes, but there are several good reasons why people choose to avoid it.
There is no reason why you wouldn’t want your loved ones to receive their inheritances as soon as possible after you pass away. Why should your assets be sitting around in limbo for months?
This is exactly what will happen if your estate passes through probate. The court gives creditors time to come forward seeking satisfaction, and there are procedural formalities. From a practical perspective, the executor must prepare assets for distribution, and this can be time-consuming.
Even if everything goes well, it will take about nine months at minimum, and no inheritances are distributed while the estate is being probated by the court.
Loss of Privacy
Most people like to conduct their financial affairs confidentially, but privacy is lost when an estate goes through probate. The records are available to the general public, so anybody can access the records to find out how the assets were distributed.
A number of different expenses accumulate during probate. These would include the executor’s remuneration, legal and accounting fees, court costs, appraisal charges, liquidation expenses, and additional incidentals.
The expenditures will typically consume between three and seven percent of the estate, and this money is essentially coming out of the pockets of the inheritors.
Asset Transfers Outside of Probate
Some types of asset transfers are not subject to probate, even if there is no overt intention to avoid it. When property is held in joint tenancy, the surviving joint tenant or tenants will inherit the deceased person’s interest in the property, and probate would not be a factor.
Banks and brokerages offer payable on death options. You can name a beneficiary, and they would inherit the account after you pass away. The Surrogate’s Court would not be involved in any way.
Life insurance proceeds are transferred outside of probate, and distributions from an inherited individual retirement account are not subject to this process.
Revocable Living Trust
If you want to make sure that your assets are transferred to your heirs outside of probate, you can use a revocable living trust as the centerpiece of your estate plan. As the name would indicate, you can revoke or dissolve the trust at any time, and you would act as the trustee while you are living.
After you are gone, the successor trustee that you name in the trust declaration would distribute assets to the beneficiaries, and the probate process would be avoided.
In addition to this benefit, you can include spendthrift protections, and the consolidation of property ownership streamlines the process. Another advantage is the fact that you can name a disability trustee to administer the trust in the event of your incapacity.
Schedule a Consultation Today!
The revocable living trust is the ideal estate planning tool for many people, but it is just one possibility. The ideal way to proceed will depend on the circumstances, and this is why should discuss your options with a licensed New York City estate planning attorney.
When you work with our firm, you can rest assured that your plan will be custom crafted to ideally suit your needs. If you are ready to set up a consultation, we can reached by phone at 212-973-0100, and you use our contact form if you would like to send us a message.