Probate is a court procedure that enables your estate assets to transfer to your heirs. When you pass, the “title” to certain assets cannot transfer to your heirs unless your Will is probated.
The probate court oversees this process and the assets cannot be distributed until the court approves the proposed distribution.
This process can sometimes be cumbersome and is typically done with the assistance of an attorney. This can result in time and money (court fees and attorney fees) spent to get assets distributed to your heirs. This is typically why people want to avoid the probate procedure if it makes sense.
However, not all assets must go through the probate procedure in order to be distributed to your heirs. Oftentimes people will title assets or name beneficiaries in order to avoid the probate process. This can be a great plan if implemented correctly. However, many people do things to avoid probate without understanding the unintended consequences that may occur. The unintended consequences can cause bigger problems than what the probate process would have been.
For instance, you may think it would be easy to make your real estate “transfer on death” to your three children which will avoid the probate process. However, in order for your three children to sell/transfer the real estate after your death, all three children plus each of their spouses must sign the deed to transfer the real estate. That may be a problem if one of the children are in the middle of a divorce or one of the children is married to someone who is generally not cooperative with the rest of the family.
Many people are often advised by their bank or financial planner to make an account “payable on death” to their children or add their children as beneficiaries. That makes sense on the surface but if that bank or financial planner does not know of all your assets and how they are titled and what your general estate plan is, that may be a problem. For instance, if you have real estate that needs probated but your cash accounts all transfer outright to your heirs, your Executor has no cash to use to maintain the real estate until it sells.
Another pitfall is if you make one child the beneficiary of one account, and another child the beneficiary of another account. If you get sick and one of your accounts is depleted to pay for your care, the beneficiary child on that account will receive nothing upon your death and that was not your intention.
The issue to keep in mind is that it is best to get comprehensive advice regarding your entire estate plan. Let your attorney know of all your assets and how they are titled and who you want to receive them when you pass. Your attorney can help you avoid probate if it makes sense. Your attorney will also be able to advise you of the pitfalls of certain planning. If you “piecemeal” your plan in an attempt to avoid probate, there may be some unintended negative consequences that result.
Tagged In:Elder LawEstate PlanningProbate