There are a few reasons that avoiding probate may be your goal for estate planning. It may be that the expected cost of the probate process is more than you want your family to incur after your death. It may be that you don’t want your family to wait years to receive their inheritances. Regardless of your reasons, avoiding probate is a decision you should discuss with your probate attorneys beforehand.
Is Completely Avoiding Probate Actually Possible?
A question clients often ask is whether it is actually possible to avoid probate altogether. Considering all of the estate planning options available, it is not only possible – avoiding probate is pretty easy. There are a variety of probate avoidance strategies you can use, including revocable living trusts, joint ownership of property, pay-on-death accounts, and gifts. Below, we will explain some of these strategies and how they can be used for avoiding probate.
Revocable Living Trusts
One of the main goals of a living trust is to provide a way to avoid probate. Although a trust is similar to the last will and testament, a trust provides some benefits that a will does not. For instance, a trust can be used to set aside valuable property that will not become part of your estate upon death. With a trust, the trustee actually owns the property once it has been transferred or funded into the trust. That means the trustee owns the property and you don’t – removing that property from your estate. Trusts also allow you to determine precisely how your property will be distributed upon your death. Upon your death, your designated trustee will be able to easily transfer the trust property to your selected beneficiaries without going through the probate process.
Joint Ownership of Property
Avoiding probate can also be accomplished through joint ownership in certain property. With joint ownership, when the first owner passes away the surviving owner automatically retains ownership in that property. This automatic transfer of ownership occurs without the need for probate. There are different types of joint ownership, but joint tenancy with right of survivorship is the type that will allow your property to transfer automatically. If you have questions, let our probate attorneys know.
Avoiding probate can also be accomplished by changing financial accounts, such as banking and retirement accounts, into pay-on-death accounts. In most cases, this simple process only requires that you complete a form identifying your beneficiary for those accounts. Ultimately, when you pass away the money in the account will be transferred automatically to your chosen beneficiary without the need for probate. This same process can be used for transferring ownership in vehicles and certain securities by changing the beneficiaries on the applicable registrations. Another method is to draw up a special deed that allows you to transfer your real property by identifying a beneficiary in the deed document itself.
Transferring Property Through Gifts
Gifting your property while you are still alive is another simple way of avoiding probate. Essentially, if you no longer own the property at the time of your death, then there is no need for the property to go through probate. In fact, you can reduce the size of your estate significantly by gifting your personal possessions before your death instead of allowing them to be distributed after your death during probate. Depending on the value of the gift, there may not be any tax consequences.
Avoid the Appearance of a Fraudulent Transfer
One legal issue that you should be aware of is fraudulent transfers. First, fraudulent transfers become an issue when it appears that they were made in an effort to avoid paying a debt. If a transfer or conveyance of property is made with the intent of protecting your assets from creditors, that can be a problem. But the timing of the transfer is key.
In order to avoid the appearance of fraudulent transfers, your transfers must be made before a creditor’s claim or legal judgment is made. In reality, even if you have no intention to avoid a debt, you can still be suspected or accused of fraud depending on when the transfers are made.
Join us for a free seminar today! If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.
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