To create a successful, comprehensive, estate plan, you need to focus on more than just the distribution of your estate assets when you are gone. In fact, a well thought out estate plan typically includes a variety of different components that make use of numerous different estate planning tools and strategies. In order to determine what components should be included in your estate plan, you must first consider what your estate planning needs and goals are. One common estate planning goal is probate avoidance. The key to probate avoidance, in turn, is to include as many non-probate assets as possible in your estate at the time of your death. Of course, in order to do that you must understand what is included in your probate estate and which assets are considered non-probate assets.
Probate Basics – Why Do I Want to Avoid Probate?
You have likely heard that avoiding probate should be one of your estate planning goals; however, if you don’t know much about probate itself, you likely don’t know why avoiding probate is such a common estate planning goal. Probate is the legal process that is typically required after someone dies. There are several reasons why probate is required, including:
- It provides a framework within which the decedent’s estate assets can be identified, located, and valued.
- It provides for the identification, location, and notification of legal heirs of the estate if the decedent died intestate, or without a Last Will and Testament in place.
- It allows creditors of the estate to file claims against the estate before estate assets are distributed.
- It ensures that all state and federal taxes are paid.
- It distributed the remaining estate assets to beneficiaries and/or heirs of the estate.
Most states offer a simplified alternative to formal probate for small estate; however, estates that do not qualify for a small estate alternative must go through the formal probate process. Formal probate takes months, even years, to complete and will incur a significant amount of expenses along the way. Those expenses are all charged to the estate, effectively diminishing the value of the estate that is ultimately passed down to loved ones. Furthermore, assets that are part of the probate process remain out of the reach of the intended beneficiaries until the end of the probate process, making them effectively useless to the beneficiaries in the meantime. For these reasons, people often choose to include probate avoidance techniques and strategies in their estate plan.
What Is Part of My Probate Estate?
When you die, all of your assets must be identified and located by your Executor or Personal Representative. Those assets must then be classified as probate or non-probate assets. The basic rule is that if an asset does not specifically fall into a non-probate category, it must be part of the probate process.
Common Non-Probate Assets
The key to avoiding probate is to change as much of your estate into non-probate assets as possible. By working closely with your estate planning attorney you will find that you can leave behind a largely non-probate estate, thereby ensuring that your loved ones will receive those assets shortly after your death instead of having to wait until the end of the probate process. Some of the most common non-probate assets include:
- Trust assets – assets held in a trust are considered trust property. As such, they are not part of your estate and may be distributed, according to the terms of the trust, immediately following your death.
- POD or TOD assets – Accounts designated as “payable on death” or “transfer on death” allow you to name a designated beneficiary. While you are alive, you are the sole owner of the account; however, upon your death, ownership of the account automatically transfers to the designated beneficiary.
- Life insurance proceeds – proceeds of a life insurance policy can be distributed to the named beneficiaries immediately following your death without the need to go through probate.
- Certain jointly held assets – if jointly titled with “rights of survivorship,” property owned jointly will avoid probate. Your interest in the property will automatically transfer to the co-owner(s)
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding your probate estate or how to include probate avoidance in your estate plan, contact the experienced New Hampshire estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
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