Probate avoidance is among the most common of all estate planning goals. If you hope to limit, or even eliminate, your estate’s exposure to the probate, you must plan accordingly. Toward that end, an Indianapolis estate planning attorney at Frank & Kraft explains five ways to avoid probate.
What’s the Big Deal about Probate?
When an individual dies, the assets owned by that individual at the time of death make up the decedent’s estate. Probate is the term given to the legal process that eventually transfers those estate assets to the intended beneficiaries and/or heirs of the estate. Probate also serves other functions, including:
- Authenticating the decedent’s Last Will and Testament if one was left behind
- Identifying, locating, securing, and valuing estate assets
- Locating legal heirs of the estate if the decedent died intestate, or without a valid Will
- Allowing creditors the opportunity to file claims against the estate
- Litigating any challenges to the Will or estate
- Ensuring the taxes owed by the estate are paid
The reason probate avoidance is such a common goal is that probate can be very costly, both in terms of time and money. In Indiana, creditors of the estate have three months to file claims against the estate after receiving notice of the probate. As such, probating even a simple estate can take months. If the estate includes valuable and/or complex assets, or becomes involved in litigation, probate could drag on for several years. In the meantime, the estate assets involved in the probate process remain out of reach of the intended beneficiaries. Furthermore, the longer, and more complicated, the probate of an estate is, the more fees and costs are incurred as a general rule because everyone involved in the process is entitled to be paid for their services. For these reasons, avoiding probate is a common estate planning goal.
Ways to Avoid Probate
To limit your estate’s exposure to probate after you are gone, you must proactively include probate avoidance strategies in your estate plan now, such as
- Lifetime gifting. Only assets owned by you at the time of your death are potentially subject to going through probate. With that in mind, gifting assets while you are still alive instead of waiting until your death is an excellent probate avoidance strategy. In addition, there are often tax advantages to lifetime gifting that may further benefit your estate.
- Using a trust to distribute assets. Assets held in a trust are non-probate assets and can be distributed immediately if the trust terms dictate. Most assets, including you home, can be held in a trust. Using a trust as your primary method for distribution of your estate assets can dramatically reduce the size and value of your probate estate.
- Titling assets jointly with rights of survivorship. Certain types of jointly held property will bypass probate. The key is that the property must be held jointly with rights of survivorship. Your interest in jointly held property with rights of survivorship will pass directly to the co-owner upon your death.
- Designating accounts as POD or TOD accounts. Certain accounts can also be designated as “Payable on Death (POD)” or “Transfer on Death (TOD)” accounts which allows you to designate a beneficiary who will automatically become the owner of the assets held in the account upon your death. Unlike jointly held assets, however, a beneficiary of a POD or TOD account has no ownership interest in the asset while you are alive.
- Relying on life insurance. The proceeds of a life insurance policy also avoid probate. Not only can these proceeds be used to immediately provide for loved ones, but you can also create an irrevocable life insurance trust (ILIT) to cover your own funeral and burial expenses.
Contact an Indianapolis Estate Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about avoiding probate, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.