Top 5 Questions for Your Estate Planning Attorney – Q2
Question #2: How do I avoid the probate process?
When putting together your estate plan and family protection plan, you should have two goals in mind:
Goal #1: How do I keep the government out of my life?
Goal #2: How do I keep the courts out of my life?
You can accomplish these goals by hiring a professional estate planning law firm who focus exclusively in the areas of estate planning and elder law and are experts in properly drafting a solid family protection plan. The key to avoiding the probate process and keeping the courts out of your life is making sure you have a properly drafted Trust plan.
What is the Probate process?
The legal process for transferring property to one’s heirs and handling creditors after death is called “Probate.” Probate involves the court and requires an attorney. In most cases, some type of Probate is required. Determining what type involves many factors. Did your loved one die with or without a Will? What type of property did they own? How much is it worth? Did they have any creditors? Do the heirs get along? The answers to these will influence whether the Probate Process will be simple, quick and inexpensive, or complex, time-consuming and expensive.
Two of the most important questions to answer to determine what type of probate will be required are:
Is there a Will?
If so, the court must approve it before property can be distributed as the Will provides. If not, an “heirship” proceeding is required so the court can determine who the legal heirs are under Texas law.
What kind of property?
Probate assets are anything a decedent owns in their own name that has no way of passing to a living beneficiary without a court-supervised legal process. Certain property passes automatically without the need for Probate. Common examples are bank accounts with rights of survivorship or “pay on death” provisions, and life insurance policies or retirement accounts with valid beneficiary designations and living beneficiaries.
However, assets without those provisions or living beneficiaries and most other property must go through Probate. These include:
- Real Estate (out-of-state real estate requires two Probate proceedings: one in the state of the decedent’s residence and one where the real estate is located)
- Personal property, such as jewelry, furniture, and automobiles (especially is there is a family dispute over the property)
- An interest in a partnership, corporation, or limited liability company
- Any life insurance policy or brokerage account that lists either the decedent or the estate as the beneficiary
How do trusts avoid Probate?
One of the best ways to avoid probate is to create a living trust. This trust then holds your assets in its name rather than in your own name. By creating a living trust and then transferring your assets into it, you no longer hold assets that must be transferred by the Probate process. Instead, the assets are transferred entirely under the terms of the trust, which does not involve the court. Thus, a Trust gives you can have greater control over your assets so that your wishes are carried out after you die. A living trust also can help save the expense, delay, and anxiety of Probate, which can last years and financially eat up the estate’s value. And since a trust doesn’t have to be filed or registered with the courts like a will does when it is probated, it provides much more privacy than a will. A trust also provides flexibility and creativity that a will doesn’t provide by appointing a trustee you choose to manage your assets for the benefit of your beneficiaries in exactly the way that you decide in advance of your death.
A living trust doesn’t just avoid the Probate process. A properly drafted living trust can achieve a myriad of other goals unrelated to Probate such as avoiding guardianship, reducing taxes, and protecting your beneficiaries from creditors, lawsuit predators, and future ex-spouse. I’ll discuss these more in later blogs.