It is best to avoid probate when possible. The process can be expensive, time-consuming, and prevent inheritance property from being distributed in a timely fashion. Probate is a legal requirement within the United States. Its purpose is to validate decedents’ last will and testament, settle outstanding debts, and distribute inheritance to rightful heirs.

The only ironclad way to avoid probate is to transfer assets into a trust. Not only are trusts exempt from probate, the assets are usually exempt from estate inheritance taxation. While trusts are generally reserved for estates valued over $100,000, individuals with smaller estates can engage in estate planning strategies that exclude property from undergoing the probate process.

Estate planning involves executing a last will and testament which appoints an estate administrator to settle estate matters. Individuals can bequeath property to heirs and beneficiaries within the Will; however, that does not necessarily mean they will receive the property.

Many things can go wrong during the probate process. If individuals do not execute a legal Will, inheritance property must be distributed according to state probate laws. If a Will is executed, but heirs feel slighted they can contest the Will and tie up estate assets for several months. The estate must retain the services of a probate attorney to defend the Will. Legal fees can quickly deplete the estate’s financial resources and leave nothing for intended heirs.

If decedent estates are incapable of paying outstanding debts a probate judge can order the estate administrator to sell inheritance property to settle debts. Oftentimes, estate administrators hire a probate attorney to negotiate debts. While this strategy often helps to reduce debt levels, the estate is saddled with the cost of legal fees.

In order to prevent potential chaos, individuals who do not protect assets within a trust can implement strategies to avoid probate. To ensure these strategies comply with state probate laws it is best to obtain legal counsel or work with a professional estate planner.

Individuals with checking and savings accounts can establish payable-on-death beneficiaries by filling out a beneficiary form provided by the financial institution. Upon death, the estate administrator must obtain a date-of-death value form from the bank or credit union. This form is submitted to the county Tax Assessor’s office to verify the decedent is current on tax payments.

If outstanding taxes are owed, the estate must pay the taxes in order for funds to be released to beneficiaries. If taxes are current, the tax assessor stamps the form and returns it to the financial institution. Beneficiaries must provide evidence they are the rightful beneficiary by providing picture ID and their social security number. Upon verification, funds are distributed to beneficiaries within 5 to 7 business days.

Individuals with retirement accounts or financial investment portfolios can establish transfer-on-death beneficiaries. TOD accounts are handled the same way as POD accounts. The primary difference is beneficiaries can transfer the funds into a similar account in their name or they can elect to cash-out. Beneficiaries may be subject to taxation at the state and federal level when cashing out 401k or financial portfolios.

Beneficiaries can be assigned to titled property such as real estate or motor vehicles using transfer-on-death titles. Upon death, beneficiaries must obtain a new title to document transfer of property. Some states prohibit transfer-on-death beneficiaries for motor vehicles. In these instances, property owners can obtain joint titles which allow automatic transfer upon death.

Cash gifts can be given to heirs and beneficiaries prior to death. The Internal Revenue Service allows gifting of up to $12,000 per individual or $20,000 per married couple, per year. Individuals who receive gifts over $12,000 are required to file a federal gift tax return.

These are just a few ways to avoid probate. It is crucial to work with an estate planning professional or probate lawyer to fully protect inheritance property and ensure it is given to intended recipients.

Author Bio: Discover additional ways to avoid probate from probate liquidator, Simon Volkov. His website offers a comprehensive estate planning article library covering topics of establishing trusts, executing a last will, appointing a probate personal representative, and more at www.SimonVolkov.com.

Category: Legal
Keywords: avoid probate, estate planning, probate process, probate lawyers, trusts, inheritance property