The probate courts fill an important role during the estate administration process. They help ensure that the personal representative of an estate abides by the instructions provided in an estate plan. They help determine what should happen in an intestate succession scenario where an individual dies without an estate plan. They also help resolve disputes.
Of course, estates have to pay for the time required in court. It can be very costly to litigate disagreements about estate planning paperwork or the removal of a personal representative who embezzled. Beyond that, outside parties with claims can sometimes demand payments using the resources included in someone’s estate.
People who put together comprehensive estate plans often do so with the goal of limiting which assets must pass through probate courts. The following are some of the most common strategies people use to keep assets out of probate court.
Changing ownership arrangements
Typically, only assets solely owned by an individual become part of their estate when they die. People can keep property out of probate court by adding co-owners while they are still alive. Other people take things a step further by making strategic gifts to family members, friends and others who might be potential beneficiaries of an estate. Gifts made while the testator is still alive can keep those assets out of probate court and may allow them to witness their beneficiaries enjoying their inheritances.
Filing transfer documents preemptively
When people own certain financial resources, they may not want to give others control over those assets while they are alive. However, they may want any remaining balance to go directly to specific beneficiaries instead of passing through probate court first. Investment accounts, checking accounts, savings accounts and retirement accounts may all be eligible for transfer-on-death designations. Account holders can file special paperwork with financial institutions authorizing the transfer of assets to a specific party following their death. The beneficiary of that arrangement can assume control over the account without going to probate court.
Funding a trust
Moving assets to a trust is one way of changing ownership to keep property out of probate court. Trusts give individuals more control over the use of their assets after they die. They also help shield vulnerable beneficiaries from the risks of a lump-sum inheritance. There are numerous different types of trusts that people can establish. The type of trust someone creates, the goals they have for the trust and the resources they used to fund the trust are all important considerations. People who create trusts can include very specific instructions for a trustee to ensure their loved ones do not misuse or squander an inheritance.
There may be other viable estate planning strategies for keeping specific property out of probate court. Reviewing personal holdings and probate concerns with a skilled legal team can help people establish the most effective probate avoidance plan given their unique circumstances.
