When a person dies, his or her estate must usually be probated. Probate is a process for determining who receives property and assets and settling debts against the estate. Although probate can be time-consuming and expensive, there are strategies to minimize robate costs. The dedicated Estates and Trusts attorneys of SederLaw can help you prepare by adopting strategies that save money and thereby leave more for your heirs.
Probate is used to distribute assets and property after death while ensuring estate creditors are paid for claims they have against the decedent. If a person dies without a will, the court will appoint a personal representative (typically a spouse or other heir, according to the law) to organize, transfer, and manage estate assets and debts. If the person dies with a will, the individual you nominate as executor or personal representative will serve in this capacity.
Probate can take time because the personal representative needs to administer the estate assets including paying valid creditor claims and distributing remaining assets to heirs or devisees. This can include determining, collecting and managing estate assets, paying debts the decedent owed and making distributions to heirs or beneficiaries. Creditors have up to a year from the date of death to file claims against the estate, and it is generally not advisable to distribute assets before reviewing and determining whether to pay all creditor claims. It can also take several months to have the court appoint a personal representative, especially if there are unknown heirs and assets, which can require legal research and/or publication of notice. A personal representative can charge a reasonable rate for their time spent working on the estate. A will can reduce the time invested in probate by clearly listing assets and to whom they should be distributed. Wills can also specify what assets creditor claims are to be paid from. This can make the personal representative’s job easier and accelerate the disposition of your estate.
Attorneys and personal representatives can charge the estate for their time, and the court charges a fee to file the probate. There may be additional court fees if additional proceedings, such as an accounting or the appointment of a conservator for a minor child are necessary. In some cases, probate fees can reach into thousands of dollars. This money could instead be distributed to heirs.
Here are a few ways, other than executing a will, that can save on these costs:
With a trust, an individual known as a trustee holds and manages assets on behalf of beneficiaries. Trust property does not need to pass through probate to transfer, as the terms of the trust will control the disposition of this property.
Joint Tenancy with Right of Survivorship
When property is held jointly with another individual, and with the right of survivorship, the surviving individual automatically receives the entire piece of property when the decedent passes away. This most commonly applies to real estate.
Transfer on Death Provisions
Some assets have transfer on death provisions that transfer assets to another person. Once proof of death is submitted to the financial institution, the assets pass automatically to the named person and bypass probate entirely.
Payable on Death (POD) Provisions for Bank Accounts
Savings accounts, certificates of deposit, and other bank accounts can have payable on death terms added to them. The account owner alone has rights to the account during his or her life; upon death, the individual named in the POD designation will own the account without the need to go through probate.
Some assets, such as life insurance policies and pensions, can designate a beneficiary. When the decedent passes away, those assets transfer to the beneficiary under the terms of the insurance contract, and without going through probate. However, if no beneficiary is named, these assets are considered part of the estate and must be probated.
Life Estate for Real Property
An individual may be able to transfer some rights to their real estate while retaining the right to live in and occupy the property for the rest of their life. Upon their death, the life estate is terminated and the real estate automatically transfers to the designated remainderman.
If the decedent’s estate had no real property, and the value of the personal property was no more than $25,000 (excluding the value of an automobile), the estate may qualify for a simplified probate process that can save time and money. This process is frequently used when most of the decedent’s assets were jointly owned with a spouse or other relative, leaving only a small value to be transferred through probate.
Every estate is different, and some strategies are more helpful than others when it comes to avoiding or minimizing the probate process. Your best approach for keeping estate costs down is to speak with a skilled Estates and Trusts attorney. Contact SederLaw to get started.