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, theassets owned by that individual at the time of death make up the decedent’sestate. Probate is the term given to the legal process that eventually transfersthose 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 avoidanceis such a common goal is that probate can be very costly, both in terms of timeand money. In Indiana, creditors of the estate have three months to file claimsagainst the estate after receiving notice of the probate. As such, probatingeven a simple estate can take months. If the estate includes valuable and/orcomplex assets, or becomes involved in litigation, probate could drag on forseveral years. In the meantime, the estate assets involved in the probateprocess remain out of reach of the intended beneficiaries. Furthermore, thelonger, and more complicated, the probate of an estate is, the more fees andcosts are incurred as a general rule because everyone involved in the processis entitled to be paid for their services. For these reasons, avoiding probateis a common estate planning goal.
Ways to Avoid Probate
To limit your estate’s exposureto probate after you are gone, you must proactively include probate avoidancestrategies in your estate plan now, such as
- Lifetimegifting. Only assets owned by you at the time of yourdeath are potentially subject to going through probate. With that in mind,gifting assets while you are still alive instead of waiting until your death isan excellent probate avoidance strategy. In addition, there are often taxadvantages to lifetime gifting that may further benefit your estate.
- Usinga trust to distribute assets.Assets held in a trust are non-probate assets and can be distributedimmediately if the trust terms dictate. Most assets, including you home, can beheld in a trust. Using a trust as yourprimary method for distribution of your estate assets can dramatically reducethe size and value of your probate estate.
- Titlingassets jointly with rights of survivorship. Certain types of jointly held property will bypass probate. The key isthat the property must be held jointly with rights of survivorship. Yourinterest in jointly held property with rights of survivorship will passdirectly to the co-owner upon your death.
- Designatingaccounts 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 whowill automatically become the owner of the assets held in the account upon yourdeath. Unlike jointly held assets, however, a beneficiary of a POD or TODaccount has no ownership interest in the asset while you are alive.
- Relyingon life insurance. The proceedsof a life insurance policy also avoid probate. Not only can these proceeds beused to immediately provide for loved ones, but you can also create anirrevocable life insurance trust (ILIT) to cover your own funeral and burialexpenses.
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.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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