Death is something we just don’t like to contemplate, but when we do we think about funeral planning and the associated funeral needs, funeral costs and the associated grief and depression cycle that we know our family is likely to face. But while not as visible but of even more importance, we must take great care to complete probate and estate planning to insure that our family’s inheritance is protected to the full allowance of the law.
For most of us laymen, whenever the subject of probate and estate planning comes up we think of great complexity and we often face many questions for which we have no answers. Will my estate be subject to probate? Is there a way to avoid it? It doesn’t have to be overly complex, nor should it be, and there are some relatively simple things to eliminate many of the potential problems.
Now before I get started I want to give one disclaimer. What I will be talking about here is primarily meant for those of us who have a relatively simple estate without any real complex issues. For those of us in that category, probate might not even be necessary and for the rest of us, the information provided should be at least of general value. This does not mean that we don’t need legal help to assess our probate and estate planning requirements, but often it need be only advisory in nature and not long drawn out document preparation. A good attorney can quickly assess your needs.
So what is probate and how does it affect us? The answer is really quite simple. It’s the process of making sure that the final affairs of someone are in order before final proceeds are dispersed. It is supervised by a court of law to insure legal sufficiency and it is not required of all of us. It is really designed for those who either have very complicated estates or have not properly specified the disposition of their effects and property. It can be a relatively short process or it can take months, sometimes years, depending on the particular situation. And it is also often quite expensive with significant legal fees and court costs, so anything you can do to avoid it is normally recommended.
So how can we avoid probate? Well, there are four ways and there is one important document which is critical to this, the last will and testament. It is the key to making probate and estate planning as simple as possible. Let’s talk about the will first before we look at the options to avoid probate.
The will is basically the decedent’s documentation of how property, assets and personal effects are to be distributed after death to heirs as designated after debts are first paid. In some cases, it can be handwritten but it is usually recorded as a typed document in a format which is deemed legally sufficient. To be considered valid, the will must be signed while the holder is deemed in control of mental capacity and legally of age and in front of witnesses of legal age who also sign. This is done in the presence of a notary and affixed with the notary stamp. It is important to review this with home state criteria since each state has its own law with minor variations.
Now let’s get back to the issue of avoiding probate. It really isn’t too difficult for most of us since the average American does not have an overly complex financial situation. The four things that will help you avoid probate include each of the following:
1. Joint property ownership. Our home is generally the largest investment that we have. If you are married and have it recorded as joint property (JTROS), meaning that you and your wife own it together, the property will pass automatically to the survivor. Most people do this and it makes a huge difference.
2. Declaring death beneficiaries. Here I am talking about Pay On Death (POD) accounts and retirement accounts where you name the beneficiary and a transfer takes place to the survivor upon official notification of death. These include stock, bond and brokerage accounts but remember, the decedent must declare this intention while still alive and in control of mental capacity. This is not something that gains anything from procrastination.
3. Revocable living trusts. This is a document that is made which while similar to a will also avoids probate while keeping financial affairs private after death. Like a will it can be changed at any time while alive and is usually handled directly by the maker of the trust. Since I am not an attorney, anyone interested in finding out all the pros and cons should consult counsel to see if it is right for them.
4. Lastly, gifts. Gifts left also are excluded by probate but they must be completed before death. Again, if we want to use this option, don’t procrastinate.
Just to be absolutely clear, it is imperative for each of us to review the ramifications of probate and how it works and then determine for ourselves the appropriate way to prepare our affairs so that our loved ones will be best protected. And as I have mentioned, some of us with complicated matters may have to look at more complex matters.
My purpose here is just to provide some basic information to get the thinking process cooking. By all means, refer your questions to qualified counsel to get all the answers you need and remember that each state has some variations in their state laws that apply to residents of that state. While you can find great sources of general information on line, remember that it is just that and it does not serve as the final word on legal sufficiency.
Protect your family while you gain the peace of mind knowing that you have done what is right for them. You won’t be sorry and it will pay tremendous dividends. Another important planning detail will be taken care of and we will be secure knowing that a legal nightmare will not be something they have to dread in their future.
Praise God and may He ever be with us. And God bless America.
James Dick, author of “Honey, We Shoulda’ Bought the Ark” now available on Amazon.com