Your estate plan will likely attempt to achieve several important goals and objectives. For many people, one of those important goals is avoiding probate. Whether you want to avoid probate because of the cost, the time it takes, or simply because you prefer the details of your plan to remain private, you will need to incorporate probate avoidance tools and strategies into your overall plan to ensure that your goal of keeping your estate out of probate. To get you started with your probate avoidance plan, the probate attorneys at Frank & Kraft discuss some common ways to avoid probate.
Why Is Probate Often Required?
When a person dies, he or she leaves behind an estate that consists of all the assets the individual owned or had an ownership interest in at the time of death. This includes both real and personal property as well as both tangible and intangible assets. Probate is the legal process that many of those assets must go through before eventually being transferred to the intended beneficiaries or legal heirs of the estate. In addition, probate serves to identify, locate, and value those assets as well as notify creditors of the estate and provide them with the opportunity to file claims against the estate. If a Last Will and Testament was executed by the decedent prior to death, probate also authenticates the Will, or in the alternatives, provides the legal forum for contesting the authenticity of the Will. Finally, probate ensures that any state and/or federal gift and estate taxes owed by the estate are paid.
Why Might You Want Your Estate to Avoid Probate?
Probate avoidance is a common estate planning goal for several reasons. If your estate goes through formal probate, the terms of your Will become public record. By avoiding probate you can keep details regarding the distribution of your estate private. Probate can also delay the distribution of the inheritance you intended for loved ones. In Indiana, creditors have three months after notification to file claims. Consequently, probating even a modest and uncomplicated estate typically takes a minimum of five to six months, but can easily take a year or longer. Consequently, beneficiaries must often wait a long time to receive their intended gifts. Finally, probate can be expensive. Everyone involved in the probate of an estate is entitled to a fee for their services which typically diminishes the value of the estate, meaning your loved ones may receive less than what you intended.
Common Ways to Avoid Probate
If you decide that probate avoidance is important to you, consulting with an experienced probate attorney is essential to ensure that the tools and strategies you incorporate into your plan fit your unique needs and circumstances. There are, however, some common ways to avoid probate, including:
- Lifetime gifting. Only assets owned by you at the time of your death are potentially subject to 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 and you get the benefit of seeing your beneficiaries enjoy the gifts.
- Using a trust to distribute estate assets. Not all assets are required to go through probate. Assets held by a trust, for example, bypass the probate process altogether and can be distributed to beneficiaries as soon after your death as you wish. Using a trust to distribute assets offers other benefits as well, such as the ability to stagger an inheritance instead of leaving a lump sum to a young beneficiary.
- Titling assets and accounts so that they pass to the new owner outside of probate. The manner in which assets are titled can also be used to avoid probate. Real property, for example, can be held jointly with rights of survivorship, allowing your interest in the property to pass directly to the co-owner upon your death without first going through probate. Certain accounts can also be designated as “Payable on Death (POD)” or “Transfer on Death (TOD)” accounts which allow 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.
Contact an Indianapolis Probate Attorneys
For more information, please join us for one of our upcoming FREE seminars. If you have additional questions about ways to avoid probate, contact the experienced Indianapolis probate attorneys 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.