A well-drafted estate plan should accomplish far more than simple designing a roadmap to be followed in the event of your death. Most estate plans, in fact, attempt to achieve several goals and objectives within the plan. One of those is probate avoidance. Once you have a better understanding of what the probate process entails you will likely understand why you may wish to have your estate avoid probate as well.
Probate is the legal process that follows the death of an individual. Probate has several purposes, chief among them is to ensure that all assets owned by the decedent at the time of death are accounted for and valued. The reason it is important to value estate assets relates to another important probate purpose – taxing the estate. All estates are potentially subject to federal gift and estate tax. Therefore, it is necessary to know the cumulative value of all estate assets as of the date of death in order to determine if the estate owes gift and estate taxes. Finally, probate serves as the conduit for estate assets to eventually be passed down to the intended beneficiaries or heirs of the estate. While probate does serves all of these purposes, formal probate also takes a long time to complete and can be rather expensive.
Avoiding probate, or at least dramatically reducing your estate’s exposure to probate is a common estate planning goal. While every estate plan is unique, there are some common strategies that can be used to achieve the goal of probate avoidance, including:
- Trust agreements – assets held in a trust agreement pass to the intended beneficiaries outside of the probate process. For this reason alone people often include at least one trust agreement in their estate plan.
- Life insurance – the proceeds of a life insurance policy are not considered to be part of the decedent’s estate and, therefore, will pass directly to the intended beneficiary outside of the probate process.
- POD and TOD designations – “payable on death” and “transfer on death” are designations that can be used on financial accounts, securities, and sometimes other types of assets. Assets held in a POD or TOD account automatically become the property of the designated beneficiary upon the death of the account holder; however, the beneficiary has no ownership interest in the assets while the owner of the assets is alive.
- Joint title – when the right type of joint title is used, assets pass directly to a co-owner without going through probate.
By using some of the common probate avoidance tools and strategies in your estate plan your plan will be able to avoid, or at least significantly reduce exposure to, probate. If you wish to add probate avoidance to your estate plan, contact the experienced Conshohocken estate planning attorneys at Kuhn & Kuhn Law Firm by calling 843-577-3700 to schedule your appointment.
John Kuhn, Estate Planning Attorney
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