Probate: Necessary Or Avoidable?
Most people are a little misled when they hear the phrase "avoiding probate." While you can keep some of your assets from being subject to probate, it may not be possible to avoid it entirely. To learn more about the need for probate, read on.
Most people believe that a will can help avoid probate, but this is a myth. The mere presence of will has virtually no connection to whether or not an estate must pass through probate. In fact, regardless of the presence of a will, most all estates will be subject to this legal procedure in your local county probate court. Normally, a will must be probated and the lack of a will, called intestate, may also require probate. You can, however, designate that assets be handled using other methods.
Outside of Probate
There is much you can do to set aside some or all of your property and keep it out of probate, and these designations are surprisingly easy to accomplish. This relatively simple process involves designating a person or persons to automatically receive the contents of a bank account or investment account upon presentation of a death certificate. You can accomplish these payable-on-death or transfer-on-death designations by filling out a form at your bank or brokerage service. The benefits of using these designations are obvious when you consider that probate can take months to complete, which could deprive the beneficiaries of receiving their inheritances in a timely manner.
Creditor's and Debts
Probate provides a method for dealing with the debts of the estate. Probate will either appoint an executor (called a personal representative in some states) and/or direct the executor named in the will to ensure that the bills are paid. Most states require that creditors be informed of the death through local newspaper advertising, where they will have a finite amount of time to come forward with any financial obligations of the estate.
Further, the executor is responsible for ensuring that the bills are paid as directed by the attorney for the estate. It's important to note the executor must work closely with the attorney, since certain bills must be paid right way (during probate) and some must wait for probate to end. One of the most important tasks of the executor is to ensure that taxes are filed and paid in a timely manner, if needed. In some cases, the decedent's income or assets are too low to necessitate a tax return.
As you may have noticed, probate serves its purpose and probably cannot be avoided completely, except in some cases. Every state has its own rules about probate matters, so be sure to speak to a local attorney for more information. Additionally, consult with an estate attorney to find out about even more legal instruments that could help keep your property out of probate, such as revocable trusts, life insurance proceeds, and more.