When you sit down to create your estate plan, the primary focus of your plan will likely be the disposition of your estate assets at the time of your death to ensure that they are available to help provide for your loved ones in your absence. Your plan, however, may also include additional components aimed at achieving a wide variety of additional, inter-related, estate planning goals. Probate avoidance is a very common one of those goals. To help you understand probate and the desire to avoid it, the Harrison estate planning attorneys at the Law Offices of Kobrick & Moccia offer some common tools and strategies used to avoid probate.
What Is Probate and Why Is It Necessary?
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.
Do All Estates Go through Probate?
Most estates must go through some type of probate; however, not all estates are required to go through formal probate. In most states, including the State of New York, small estates that meet the requirements are allowed to use a small estate alternative to formal probate. Typically, this decreases both the time and cost of probate significantly.
How Can My Estate Avoid Probate?
Although it may be impossible to avoid probate entirely, there are several estate planning tools and strategies that can dramatically decrease the amount of time and money spent on the probate of your estate. The time and expense of formal probate are the primary reason why probate avoidance is a common estate planning goal. Formal probate can take months, even years, to reach a conclusion. In New York, formal probate will require a minimum of seven months to complete because creditors of the estate have up to seven months from the date that the Surrogate’s Court issues Letters (basically when probate officially begins) to file a claim. Probate assets remain out of the reach of the intended beneficiaries while probate is open, meaning the beneficiaries cannot benefit from the use of the asset until probate is finished. In addition, there are a number of expenses related to the probate process and they typically increase the longer probate takes to reach a conclusion. Everyone involved in the probate process is entitled to a fee, including the Executor, estate planning attorney, appraisers, real estate agents, and accountants. The time and money expended during probate create a huge incentive to include probate avoidance as an estate planning goal.
In general, the key to minimizing the time your estate spends in probate is to reduce the number of probate assets in your estate. Not all assets are required to go through the probate process. Non-probate assets bypass probate and can, therefore, be distributed to the intended beneficiaries immediately following your death. Some commonly used non-probate assets include:
- Trust assets – assets held in a trust bypass probate. For this reason, people often choose to use a trust agreement as their primary estate planning document for distributing assets after death. Using a trust has the added benefit of confidentiality because while your Will is a matter of public record once admitted to probate, a trust agreement is not.
- Life insurance proceeds – proceeds from a life insurance policy are not part of the probate process and are, therefore, paid out immediately to the beneficiary.
- Jointly owned property – co-owned property, held jointly with rights of survivorship, can be an excellent probate avoidance technique. Upon the death of one owner, that owner’s interest in the property is automatically transferred to the survivor(s).
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about avoiding probate, contact the experienced Harrison estate planning attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.