Probate is a legal proceeding used to settle the estate of a person who has died. The judge appoints an executor or executrix who becomes responsible for gathering the assets of the decedent, paying off the creditors and then distributing the assets to the beneficiaries. Any interested party such as beneficiaries or creditors can open probate. There are three reasons why every family would want to avoid the probate process: (1) it is expensive; (2) it is time consuming; and (3) it is public in nature.
While the fees for probate will vary from state to state, it is reasonable to use an estimated fee equal to 5% of the fair market value of the probate assets. Probate assets usually include all assets you own except life insurance, annuities and retirement plans (although sometimes these assets do become probate assets). At a fee of 5%, the probate fees can get very high. Probate normally takes at least 9 months, although it does vary from state to state. Finally, all probate procedures leave a public record open to financial predators who may be looking for families to trouble.
How to Avoid Probate
To understand how to avoid probate, we need to understand what triggers the probate. Normally, a probate is opened if a person dies with real estate in their name or a certain minimum amount of other assets in their name (for example, if you have over $25,000 in bank accounts or brokerage accounts). Therefore, if you want to avoid probate, you simply need to gift your real estate and other assets out of your name before you die. The problem is that you will lose control if you gift the assets to another person.
Living Trusts Make Avoiding Probate Safe and Easy
A probate attorney Las Vegas trusts can form a Living Trust that gives you 100% control over all assets it may own. So the simple trick is to transfer all the assets you own to the Living Trust. That will leave you with no assets in your name for probate purposes. You will have the same amount of control over the trust assets as you did when the assets were in your name. There are no income tax consequences for making the transfers, and most banks will permit such transfers if there is a mortgage on the real estate.
Other Solutions Only Delay the Probate
Some folks will suggest that to avoid probate you merely need to have a co-owner for all your assets. However, that will only delay the probate until the co-owner dies; but eventually, there will still be a probate. Meanwhile, you have over-exposed the assets to the financial troubles of your co-owner such as lawsuits, bankruptcy and divorce.
The probate process creates extraordinary fees, time delays and exposure for your family. Living Trusts are a cost effective way to avoid probate while at the same time keep you in total control of your assets.
Thanks to our friends and contributors from The Law Offices of Gary L. Fales & Associates for their insight into the probate process.