The distribution of assets left behind by a deceased relative seems like it should be a relatively straightforward process, but that is not always the case. If going through probate is required to determine the fate of a particular estate, then matters can become significantly more complicated.
Because of how probate can bog down the process of distributing the assets in an estate, many people are curious if there are ways to get around it. For example, is probate required in all cases, or are there exceptions?
Continuing with the rest of this article, you can learn more about this important topic. Use the knowledge you gain here to figure out what you want to do about your estate.
What Is Probate?
Probate is a legal process the court must conduct before they can distribute the assets in a deceased person’s estate.
During probate, the court will determine if the will left behind by the deceased individual is valid. The will “must be proved to the satisfaction of the court” before it can be regarded as legitimate. You must file first in the Surrogate’s Court to start the probate process.
After the judge in the Surrogate’s Court confirms the validity of the will, the process of distributing the assets in the estate can begin. Because there is a will available, the court will follow the wishes laid out by the decedent.
Although the Surrogate’s Court will not be directly involved in the distribution of the estate’s assets, they will still oversee the process. Many people who need to navigate probate hire lawyers to go through the process faster. Hiring a lawyer may seem unnecessary, but professionals recommend it if you want to avoid any mistakes seen as deviations from the decedent’s wishes.
Why Do People Want to Avoid Probate?
Now that we know about the significance of probate, let’s address a frequently asked question related to it. Why do so many people want to avoid probate?
While the importance of probate is clear, there is no denying that it has also its disadvantages.
The Cost of Probate
One of the main concerns regarding probate is its cost. The court does not conduct this process for free. You will need to pay probate fees eventually, which can be expensive. There is no set amount you pay since they tie the relevant fees to the dollar value of the estate.
The idea of paying the court to check the validity of the will left behind by a loved one does not sit well with a lot of people. That is why they consider ways to bypass probate when managing their estate.
The Length of Probate
People also dislike the probate process because of how long it usually takes. Consider yourself lucky if they complete the probate in six months. Unfortunately, many of these cases take years to resolve.
Numerous factors can also lengthen the probate process. If creditors start to stake their claims to the estate, the process may slow down considerably. Complaints raised by some of the beneficiaries themselves can also drag this process out even further.
If you are dependent on the decedent for your living expenses, waiting years or even months for their estate to pay out is far from ideal.
The Public Nature of Probate
The public nature of probate can become concerning because you probably do not want strangers knowing you left your children a substantial inheritance. Unfortunately, keeping those matters private is impossible because probate is a public process.
Examining the Necessity for Probate in Different Scenarios
The importance of probate is obvious, but the drawbacks are clear as well. Upon learning probate’s drawbacks, it is easy to understand why so many people want to avoid it.
Before discussing ways to avoid probate, let’s first determine if it applies to your situation.
Is Probate Required if the Decedent Left No Will Behind?
Probate is required if a decedent left a will, but what if that important document is missing? Is probate still required in that situation?
Technically, the court does not require probate for estates that do not have a will. Instead, they hold an administration proceeding to determine how to distribute the assets.
In New York State, the decedent’s closest family member is the one who must file for an administration proceeding. The person filing for the proceeding must submit several documents, including a Petition for Letters of Administration. The petitioner will also be appointed as the estate administrator if the court recognizes their petition.
Citations must also go to the distributees of the decedent’s estate. Upon receiving those citations, the distributees can either consent to the administrator’s appointment or visit the Surrogate’s Court to voice their disagreement.
If there are no objections, the court can send the Letters of Administration to the rightful heirs to distribute the assets. However, since no instructions indicate how to distribute them, they will follow state laws.
Does the Size of an Estate Affect the Need for Probate?
We mentioned earlier that cost is one of the reasons why many people want to avoid probate if possible. Notably, the size of the estate the decedent left behind is a major factor in determining if probate is still necessary.
Any estate that contains less than $50,000 worth of personal property at the time of the decedent’s death is considered a small estate. If a decedent owned real property at the time of their death, their estate would not be considered small. Exceptions are only granted to that rule if another person jointly owns the property in question.
In lieu of probate, small estates can become subjected to a process known as voluntary administration. A voluntary administration is similar to an administration proceeding. The main difference between the two is cost. The filing fee for a voluntary administration is only $1 in New York State.
Wills are still honored in voluntary administration proceedings. Since a will is available, the executor chosen by the decedent will be the one who manages the voluntary administration of the small estate.
Is Going Through Probate Necessary?
Interestingly, you do not need to go through probate. However, opting not to subject your loved one’s estate to probate means you will not get the assets in their will. No heir will be officially recognized until they complete the probate process.
No matter how inconvenient the probate is, it still beats ending up with nothing. Of course, there are ways to circumvent the need for probate if you plan ahead of time.
The Different Ways to Avoid Probate
You may have no desire to subject your loved ones to the probate process. That sentiment is perfectly understandable, but it can also be an issue. As we noted in the previous section, not going through probate means your loved ones cannot legally possess the assets you detailed in your will.
Thankfully, there are ways to pass on your assets to your loved ones without getting the court involved. Something like that is made possible by careful estate planning.
For the rest of this article, we will detail the different tools you can use to avoid probate. Consider them carefully and see if any of them stand out as good alternatives.
Secure Assets with Designated Beneficiaries
Some assets you purchase while you are still alive can be transferred automatically to your beneficiaries after you pass away. These assets are the ones that name designated beneficiaries.
A prime example of this type of asset is a life insurance policy. If you die, the payout from your policy will go directly to your listed beneficiaries. The court will not hold things up to subject your life insurance policy to greater scrutiny.
Payouts from a life insurance policy may be delayed for different reasons, but it will not be because the Surrogate’s Court is stepping in to request probate.
You can also transfer your retirement plan to your beneficiaries without the court getting involved. Both 401k and 403(b) plans usually qualify for quick transfer. The same goes for any individual retirement plans that your parents or grandparents may have.
Invest in Stocks and Bonds Using a Transfer-on-Death Form
Plenty of people use their savings to invest in the stock market. They then use their profits from the stock market to set money aside for their beneficiaries. You can effectively kill two birds with one stone using a transfer-on-death form while dabbling in those investments.
Upon your death, the securities account you used to purchase stocks and bonds will be transferred immediately to your beneficiary if you used the transfer-on-death form. After your beneficiary takes ownership of your securities account, they can use it whichever way they see fit.
Some states even allow people to quickly transfer their real estate properties and vehicles using similar documents. Unfortunately, that is not an option for residents of New York State.
Add the Payable-on-Death Designation to Your Bank Account
Your securities account is not the only thing you can transfer directly to your beneficiaries without the need for probate. For example, doing the same thing is possible with your bank account if you add a payable-on-death designation to it.
From your perspective, a bank account with a payable-on-death designation functions like a normal one. You can use the money as you please, and your beneficiary has no claim to it as long as you are still alive.
However, you cannot change who the beneficiary for your payable-on-death account is once you register it. If your beneficiary passes away before you do, no one can claim that account quickly. It will be subjected to probate as well.
Create a Trust
One of the most effective ways to avoid probate involves creating a trust. A trust is a fiduciary arrangement that you can create to facilitate easier management and transfer of your assets.
While alive, you can continue placing assets in the trust to reserve them for your beneficiaries. Trusts may also allow you to avoid certain taxes, which is always a nice plus.
When you pass away, they will transfer the assets you placed in the trust to your trustee. They will assume ownership of those assets and will not go through probate.
Establishing a trust is generally a good idea, even for the sake of asset management. A trust also facilitates the quick distribution of your assets, which is an even more compelling reason to create one.
After deciding that you want to establish a trust, you will have the option of either creating a revocable or irrevocable trust. If you want to leave the option of changing your beneficiaries open, you should choose a revocable trust.
Creating a trust can be a tricky endeavor. It would be best to work with an estate planning attorney to set one up properly.
Purchase Valuable Assets as Jointly Owned Property
Any estate that contains real property is no longer considered a small estate. The inclusion of that real estate property may be the sole reason why an estate now has to go through probate.
To get around that problem, you may want to designate your real estate property as jointly owned. The presence of a jointly owned property inside an estate does not automatically disqualify it for small estate designation. However, you must ensure that the estate’s total value is less than $50,000 to maintain that status.
Note that joint ownership can also save other types of assets from probate. Vehicles and bank accounts that you jointly own with another person may also be excluded from probate when you pass away.
The assets you jointly own will become the sole property of the surviving owner upon your passing.
Are you looking for ways to avoid subjecting your estate to probate? If so, we at the Alber Law Group can offer some guidance. Get in touch with us today so we can help with your estate planning.
