Probate is the legal process of settling the estate of a decedent. The probate process occurs in court. If the decedent left a Will, the process involves proving that the Will is valid, resolving creditor claims against the estate, filing any necessary tax returns and distributing the assets to the beneficiaries according to the terms of the Will. If the decedent did not have a Will, then the assets are distributed to the next of kin as defined by Florida statutes. Often during probate, it is necessary or advisable to have estate property appraised for tax purposes.
Probate can be a complicated process, particularly if there are challenges to the Will or other disputes between creditors or heirs. Costs associated with probate include court filing fees, attorney fees and personal representative fees. The Will and other information filed in court becomes public record that people may wish to keep private. Creditors must be notified and given a period of time to file a claim against the estate. To avoid these aspects of probate, many people are interested in ways probate can be avoided. There are several methods that should be discussed with an elder law attorney.
Probate can be avoided if you ensure that all property can be transferred to your heirs or desired beneficiaries outside of the probate process. This means that instead of making a Will as your method of estate planning you will need to use other techniques to transfer money and assets in different ways.
There are a variety of legal tools that can be used to avoid probate and the right options for you will depend upon the size and the complexity of your estate and your reasons for wishing to avoid the probate process. Some of the options available to avoid probate include:
- Strategic gifts. Gifts can be given that are valued at up to $14,000 per year (or $28,000 per year per couple) without triggering any gift taxes. It is also possible to find other ways to give larger gifts without triggering gift taxes, such as when a parent pays a child’s student loans directly. Any assets given away during your lifetime avoid the probate process.
- Create a living trust. This is appropriate for larger or more complex estates. Essentially, you transfer the ownership of the property into a trust. You retain the right to use the property if you wish and you name beneficiaries who will take control of the use and ownership of the property as dictated by the terms of the trust. You’ll definitely need a lawyer to set up any type of trust and there are many different trusts, each with their own different rules and requirements.
- Joint property ownership. There are many different ways that you can jointly own property (including real estate and other property) in which the property will transfer automatically to co-owners upon your death without triggering probate. One weakness in this plan is if the co-owner predeceases you, then the asset would pass through your probate estate.
- Designating a beneficiary. Any asset that has a named beneficiary will pass directly to the beneficiary at your death and does not pass through probate. Common assets that have beneficiary designations include life insurance, IRAs or other retirement plans and annuities. It is also possible to name a beneficiary on any type of bank or financial account.
These are a few of several techniques you can use to avoid the probate process. An experienced attorney can help you explore your options and find the right solution for your needs.
category: Probate & Trust Administration