For those who pass on all of their assets through their last will and testament, probate may be unavoidable. However, probate may be almost entirely avoidable for those who plan ahead. The government has the authority to transfer property from one individual to another after they pass. The only other person who has the authority to transfer their own property is that person themselves. Luckily, there is a mechanism for them to do exactly that: Living trusts. Living trusts allow them to allocate property to the trust and then disperse it immediately upon their passing. In this article, we’ll discuss the probate process and when property must pass through probate.
Does All of Your Property Pass Through Probate Without a Trust?
There are some cases where property may be able to avoid probate entirely, even when you don’t have a living trust in place. These involve situations where assets or property are held in joint tenancy. This mostly relates to spouses who would inherit all of the deceased’s property related to a primary place of residence. If a married couple or partners held an asset jointly (it does not need to be their home), then the asset automatically passes to the other partner upon death. It does not need to go through probate.
Real estate, on the other hand, is typically considered community property of the marriage itself. Homestead property would automatically pass to a living spouse.
Some assets that name a beneficiary will not have to pass through probate either. These can include bank accounts with named beneficiaries, life insurance policies, and more.
Finally, assets that are held in trusts do not have to pass through probate. This provides individuals with more flexibility when designing their estate plan.
Analyzing Your Options for Avoiding Probate
Ideal estate plans will utilize a combination of tools for those who want to avoid probate. Living trusts are a major part of these plans, however. The trust should designate a beneficiary or beneficiaries, but there are simply some assets that cannot be held in a trust. These include assets held as part of a retirement plan. In this case, you can name someone as a beneficiary to your retirement plan and thereby avoid probate. Other assets can be transferred to the trust and would not be subject to probate.
What Exactly is Probate?
Probate is the process of distributing your assets when you die through the court system. Probate courts have probate judges and a judge’s assistant, known as a probate attorney. The probate attorney reviews all the documents and helps the judge make a ruling on various conflicts that might arise during the probate process.
Additionally, the executor of the deceased’s estate will need to satisfy the judge and ensure that all past debts are paid, including tax debts and private debts. Outstanding debts are repaid using the capital in the deceased’s estate. Additionally, the executor must notify all interested parties that the probate process has begun.
One of the biggest problems that executors face is the sale of real estate. Additionally, businesses that have multiple interested parties can become complicated by the probate process. These present very real challenges and obstacles to executors who must account for all assets held, debts, and keep an accounting of both. In other words, it’s a pain in the neck!
The Probate Process
There are three steps to passing an estate to descendants through the court. The first step involves assigning an executor to administer the estate. In some cases, the deceased may name their own executor while in other cases, someone can apply for the job themselves. It is at this time that the court will review the last will and testament of the deceased to determine whether or not it is valid. If it is, then the asset distribution will proceed according to the deceased’s wishes.
The second part involves the managing of the deceased’s debts. If there are outstanding debts, creditors will be notified. The executor will be responsible for liquidating enough assets to ensure that the creditors are paid as much as they can be.
In the last stage of the probate process, the executor will provide an accounting to the court and the beneficiaries and request permission to distribute the deceased’s assets. If the request is granted, the assets will be distributed and the probate process is complete.
Learn More About Probate and How to Avoid It
If you’re interested in learning more about probate (or how to avoid it), contact the Palmdale estate planning attorneys at Herbert Law Office.