If you use a will to state your final wishes, it would be admitted to probate, and the court would supervise while the executor is administering the estate.
This court will also preside over intestacy matters. When a person dies without a will or a trust, the estate has to be sorted out somehow, and the court will assume control.
Probate serves a purpose because the decedent’s creditors are notified, and they are given time to seek payment. The will is examined by the court to determine its validity, and if anyone wants to issue a challenge, they can make a case while the estate is being probated.
Though it is not inherently negative, probate will take eight months at minimum in most cases, and no inheritances are distributed while the estate is going through probate. This is a significant negative, and probate expenses reduce the value of the estate.
If you use a will that is admitted to probate, your privacy would be gone, because interested parties can access the records to find out how the assets were distributed.
Probate-Free Asset Transfers
There are a handful of asset transfer types that are not subject to probate, even if you are not using them in an effort to avoid the process. One of them is the payable on death account or Totten trust.
When you open an account at a bank or a brokerage, you can make it a payable on death account by adding a beneficiary. If you pass away before the beneficiary does, the funds will be released to them after they present the death certificate to the institution. The probate court would not be necessary.
Some states have payable on death options when you register your car or truck. You can name a beneficiary, and they would assume ownership of the vehicle after your passing. The probate court would not be involved. Unfortunately, New York is not one of them, but they have this option in New Jersey and Connecticut.
If you own property, you can adjust the ownership documents to create a joint tenancy. In so doing, you would be giving the person that you name co-ownership of your home.
The surviving joint tenant would assume ownership of the deceased joint tenant’s interest in the property outside of probate.
Revocable Living Trust
You can use a revocable living trust as the centerpiece of your estate plan if you want to implement a proactive probate avoidance strategy. The first step is to create and fund the trust, and you would be the trustee while you are alive, so you don’t surrender control of the assets.
Your heirs would be the beneficiaries, and you name a successor trustee to act as the administrator after your death. This can be someone that you know personally, and you can alternately use a professional fiduciary like the trust department of a bank or a trust company.
After your passing, the trustee would follow the instructions that you leave in the trust declaration. Assets would be distributed to the beneficiaries in accordance with your wishes, and probate would not be a factor.
The avoidance of probate is one reason why people use living trusts, but there are other benefits, including the ability to provide spendthrift protections. You should definitely consider the utilization of this type of trust when you are planning your estate.
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