When you initially set out to create an estate plan your primary objective was probably to ensure that your estate assets would be distributed according to your wishes in the event of your untimely death. As both your estate and your family has grown, you may now be ready to add to that basic plan and create a more sophisticated and comprehensive estate plan that includes additional, yet related, goals. The Geneseo estate planning lawyers at Nash, Nash, Bean & Ford, LLP explain why probate avoidance should be among those additional goals.
What Is Probate?
At the time of your death, you will leave behind an estate that consists of all assets owned by you at the time of your death, including real and personal property as well as intangible and tangible assets. Ultimately, those assets must be legally transferred to the new owners, beneficiaries named in your Last Will and Testament and/or additional estate planning documents. Before that can happen, however, the estate must go through the legal process referred to as “probate.” During the probate process, several important things occur, including:
- All estate assets are identified, located, and valued
- Last Will and Testament is authenticated
- Any challenges to the Will are litigated
- Beneficiaries and/or heirs are notified
- Creditors are notified
- Creditor claims are reviewed and approved or denied
- Gift and estate taxes are calculated and paid
- Remaining assets are transferred to the new owners
Why Is Probate Avoidance A Common Goal?
There are two basic reasons why people often choose to add probate avoidance to their estate planning goals – time and cost. Probating even a relatively simple estate can be very time-consuming. Every state allows creditors a time period within which they may file claims against the state. Although the amount of time varies from state to state, four to six months is the average (in Illinois it is six months) and the probate process cannot terminate before the end of that time frame. Practically speaking, this means that probate assets are tied up for months waiting for the conclusion of the probate period. Meanwhile, intended beneficiaries are unable to reap the benefit of those assets. If you have a family that depends on your financial contribution to pay the bills, leaving them a small fortune in your bank account won’t be very helpful in the short run if they cannot access the funds until the probate of your estate concludes.
The other primary drawback to probate is the cost associated with the process. As a general rule, the longer it takes to probate an estate, and the larger the estate is, the more expenses are associated with the probate process; however, even probating a relatively modest estate can be costly. Everyone involved in the probate of an estate is entitled to a fee, including the Executor, estate planning attorney, appraisers, and accountants. Costs associated with the probate process are deducted from the estate assets, thereby diminishing the value of the estate that is ultimately passed down to loved ones.
Probate Avoidance Strategies and Tools
The overall key to avoiding probate is to leave behind as few probate assets as possible because not all assets are required to go through the probate process. Assets held in a trust, for example, bypass the probate process altogether. Consequently, those assets can be distributed to beneficiaries as soon after your death as you wish using the terms you create when you establish the trust. Likewise, certain types of joint ownership allow your interest in an asset to pass automatically to the co-owner(s) immediately after your death without the need for that asset to go through probate. Accounts designated as “payable on death (POD)” or “transfer on death (TOD)” also allow the assets to be passed directly to the designated beneficiary upon the death of the account holder. Finally, life insurance proceeds are also an excellent probate avoidance tool because those funds can be distributed immediately to the designated beneficiary instead of being held up in probate.
Contact Geneseo Estate Planning Lawyers
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns regarding how to include probate avoidance in your estate plan, contact the experienced estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.