How to Avoid Probate

When probate is required, the process can be expensive and time-consuming. To avoid probate court, with all its complications, consider these factors.

What Is Probate?

Probate is the process by which a person’s estate is settled after death. Final bills are paid. Final taxes are filed. Assets are collected and distributed to the beneficiaries.

The entire process is supervised by the court. It usually takes 9-12 months or more. The probate process also comes with expenses—court costs and attorney fees—that can exceed 4 percent of the estate. Additionally, probate files, including the will and a full inventory of assets, are public information. For those reasons, many people want to avoid probate.

How Can You Avoid Probate?

An estate planning and probate attorney might suggest these strategies.

Revocable Living Trust: The most comprehensive strategy to avoid probate is a revocable living trust (RLT). An RLT is essentially a substitute for a will. At death, the property in an RLT passes to the beneficiaries just as it would under a will. However, with an RLT, there is no need to probate the estate. The RLT owns all of “your” assets, and the individual owns nothing. Because the individual owns no assets, it is not necessary to probate the estate. 

Designated Beneficiaries: In some circumstances it may also be possible to avoid probate without creating an RLT. Assets that have designated beneficiaries pass directly to those beneficiaries, outside of probate.

If all the assets in an estate have designated beneficiaries, no probate is necessary. However, relying on beneficiary designations is not appropriate for every situation and should be used with caution:

• The strategy is rather inflexible.
• It needs to be monitored regularly to address changes in assets.
• It doesn’t allow for contingencies (such as the death of a child) that can and should be addressed in wills and RLTs.

Joint Ownership: Iowa does not allow real property to have a designated beneficiary. For real estate owners, the only way to avoid probate is to have an RLT or to name a joint owner. When property is jointly owned, the property passes automatically to the surviving owner at the death of the first owner, and no probate is necessary. That often makes sense when both spouses are alive. 

However, a joint owner has immediate rights in the property—unlike a person who is simply named as a beneficiary of a retirement plan or life insurance policy. They have the right to use the property and must consent to any proposed sale or mortgage of the property. Additionally, the property might be exposed to the creditors or potential creditors of all joint owners. Most people do not want to burden themselves with those lifetime restrictions and risks when the joint owner is anyone other than a spouse.

Avoiding probate is possible and desirable for many people. Business owners, people concerned with privacy, and those who want to simplify the estate settlement process should consider revising their estate plan to help their family avoid probate. Consult your Nyemaster attorney for assistance.