How to Avoid Probate?
by Unbundled Legal HelpSeptember 17th, 2021
If you want to leave your assets behind for your children and other beneficiaries, you want them to receive as much as possible. Sadly, many estates end up paying massive probate fees to the government. Fortunately, avoiding the costs and hassle of probate is not as difficult as it may seem.
Here are a few ways to avoid probate:
Creating a Trust
Designating Beneficiaries on Your Financial Accounts
Giving Away Your Property
Establishing Joint Ownership of Property
Taking Advantage of Provisions in the Law
Depending on your circumstances, avoiding probate can be a simple process. However, in many cases, it can be beneficial to consult with a proven estate planning, tax, and probate lawyer.
Learn more about how to avoid probate below.
What Triggers Probate?
Probate is a legal process where a probate judge manages the distribution of a person's property upon their death. The probate court typically appoints someone to oversee the process, ensure all debts are paid, and the property is distributed to the appropriate parties.
If there is no will in place, your state’s laws will dictate how the distribution of your property is handled when you pass away. If there is a will, then it will be probated, and your assets will be transferred according to the instructions.
Why Should You Avoid Probate?
The most obvious reason for avoiding probate is the costs. When probating an estate, you will have to pay filing fees, publication costs, as well as lawyer fees. Needless to say, that can quickly add up to thousands of dollars.
In addition to the high costs, the typical probate process can take months or years to conclude. This means that your beneficiaries will not only have to pay fees, but they will also have to wait to receive your property.
Fees and the amount of time to probate an estate are not the only drawbacks. Probate information becomes a public record. This means that the value of your property, debts, names of your heirs, and the general nature of your property can be known by anyone.
Avoiding probate helps your family to receive the full worth of your assets. It also saves them from the stress and headaches involved in the probate process.
How Do You Get Around Probate?
Probate is not inevitable. Avoiding probate is much easier than it seems. Unfortunately, many people fail to do so. It’s important to note that there is no “one-size-fits-all” approach. What works well for one estate to avoid probate, may not be good for another. If you are unsure, it can be helpful to consult with a knowledgeable estate planning and probate lawyer to learn more about your options.
Listed below are a few tips to help you avoid probate.
1. Create a Trust
One of the most effective ways to avoid the probate process is to create a living trust. While a will simply distributes your assets when you die, a trust places your property “in trust.” Those assets are then managed and distributed by the trust. The process is overseen by a trustee.
Trusts can be beneficial to you and your beneficiaries. Unlike a will, they help you to avoid the probate process since your assets will already be distributed to a trust. In addition, a trust can provide many tax benefits to the creator of the trust (grantor) and the beneficiaries.
The costs of hiring an estate planning lawyer to set up a trust are significantly more than for creating a will. However, in some cases, the costs could be lower than the legal fees associated with probate.
2. Designate Beneficiaries on Your Financial Accounts
An often overlooked method for avoiding probate involves simply adding a transfer-on-death beneficiary to your financial accounts. This can be especially beneficial if forming a trust is not a good option for you. Many people do not know that their financial accounts allow them to name beneficiaries. Examples of accounts that may be eligible for payable-on-death designations include:
Investment and retirement accounts
Life insurance policies
401K, IRA, and pension plans
Stocks, bonds, and other types of financial instruments
3. Give Away Your Property
Albeit a rather extreme option, giving away your property is a surefire way to avoid the probate process. Since you will have no property, there will be nothing to probate. However, this is just not practical for most people.
In some circumstances, a person can “give away” all of their property to a special kind of trust and name themselves a beneficiary. Creating this type of trust, or giving away your property in another manner means that you will have no assets to probate and your estate can avoid the process altogether.
4. Establish Joint Ownership
Establishing jointly owned bank accounts, investment accounts, real estate, etc. can help your estate to avoid probate. However, the account must be listed as “joint tenants with rights of survivorship.” If it is owned jointly as “tenants in common” then it may still be subject to probate.
While this is an effective way to avoid probate, there are many potential drawbacks. In some cases, adding a joint owner to your financial accounts is considered a taxable gift and will need to be reported. Also, if the designated joint owner of the account gets sued, then the assets in your account may be vulnerable.
Another drawback of a joint ownership account is if the joint owner dies, their estate could incur estate tax penalties based on the worth of half, or all of the assets in the account. Speak with your financial advisor and estate planning lawyer before choosing this route to avoid probate.
5. Take Advantage of Provisions in the Law
Though the law often has financial provisions in place for rich people, there are also certain provisions made for those with small to moderate amounts of assets. Estates under a certain value may be eligible for tax breaks and other benefits. When dealing with taxes, it’s best to consult with a professional first.
What Kind of Will Do I Need To Avoid Probate?
While a will can do many things, no kind of will can avoid probate. However, this does not mean that you should not have a will in place. Many people place smaller assets inside of their will and larger assets in a trust. It is possible to avoid probate, but it can be a difficult process that includes a comprehensive estate plan.
Is There a Penalty For Not Probating a Will?
It’s not hard to imagine why someone would want to skip out on probating a will. There are no laws that mandate a will go through the probate process. However, unless you have made other arrangements for your assets to avoid probate, your beneficiaries will not be able to obtain their inheritance unless your will is probated.
Depending on the state where you live, there may be exceptions to this rule. Conduct research and/or speak with an estate planning lawyer if you are unsure how this rule applies to you.
Do I Need a Lawyer to Probate a Will?
Technically, no. Lawyers are not needed to probate a will. Many probate cases are simple and do not require an attorney. However, it is recommended that you at least consult with an established estate planning lawyer to avoid costly mistakes and missed opportunities.
Additionally, if you have complex finances, large assets, etc. then it can be beneficial to connect with a lawyer. An attorney can help you to avoid probate or help you during the probate process in different ways. A few examples include:
Help with drafting a will and creating a trust
Understanding your state’s probate laws
Identifying property that is eligible to avoid probate
Creating a comprehensive estate plan
Obtain property appraisals
Determine tax liabilities, debts, and income tax issues
Preparing and filing all appropriate documents
How Do You Probate Without a Lawyer?
The probate process can vary slightly from state to state. However, the general process is similar across the board. These steps can be accomplished alone, but there are times that an estate planning and probate lawyer may be necessary. The probate process typically includes the following steps.
Petition the court to become the estate representative
Notify heirs and creditors
Change legal ownership of assets
Pay all debts, taxes, and funeral expenses
Transfer assets to heirs
Notify the court of your actions
How Much Do Attorneys Charge to Probate a Will?
The exact costs of probating your will vary widely depending on the state where you live and how complex your case is. Many estate planning lawyers charge an upfront fee plus an additional hourly rate on top of that.
Other times, probate lawyers base their fee on a percentage of the entire estate. This can add up to thousands of dollars in legal fees. Some states allow this practice and others do not.
Whether you are looking to avoid probate altogether or save as much money as possible on the probate process, you can save thousands in upfront legal fees by hiring an unbundled estate planning lawyer. Learn more about unbundled legal services below.
How Can Unbundled Legal Services Help Me To Save Money?
With unbundled legal services you can hire an estate planning lawyer to handle the complex parts of avoiding probate, while you save money by taking care of the rest. Fees for unbundled lawyers start as low as $500 - $1500.
If your estate planning needs are more complex, our network of unbundled lawyers also offers comprehensive estate planning services at an affordable rate.
Before you spend thousands of dollars in upfront fees to avoid probate, speak with an unbundled lawyer in your area, and learn if your estate planning needs are a good fit to be unbundled today.