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What is probate, and why consider an estate plan aimed at avoiding it?

One of the first terms people come across when beginning the process of estate planning is probate. The term refers to the court-supervised process of wrapping up the estate of a deceased individual. The probate process involves determining the validity of the deceased individual's will, appointing or recognizing a personal representative to manage administration of the estate, and distribution of the deceased person's assets to heirs.

Probate does not have to be seen as an unavoidable process, even if many estates have to pass through it. Certain estates are not bound to go through probate and planning can be done to avoid it. There certainly are reasons to want to avoid probate, include cost, time and lack of privacy. These reasons are strengthened when the costs and time are likely to be significant, and when privacy is desirable because of sensitive family circumstances. 

First of all, some estates are not required to pass through probate because they consist of only property is exempt by law or because the total value of the property is below an established amount. Other states are not required to pass through probate because of the way the property is held and transferred upon death. People can take advantage of this to tailor their estate plan to avoid probate.

One way to avoid probate is to change how the assets are held. Assets held jointly with rights of survivorship do not need to pass through probate since ownership transfers to a joint owner upon death of the other owner. While joint ownership can be beneficial from the standpoint of avoiding probate, there are certain risks and consequences of which people should be aware. These consequences relate to tax costs, loss of assets in the event of divorce, and inability to ensure children receive in the event of remarriage. Consulting an experienced attorney can help ensure that one takes all these factors into account.

In our next post, we'll look at some of the other potential tools people can use to avoid probate.

Source: TCPalm, "The problems with probate," Robert D. Schwartz, Feb. 14, 2017. 

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