11 Tips to Help Seniors Avoid Probate
Collaborative Post
Before you get knee-deep into legal procedures, it is essential to be familiar with the legal terms. Following a person’s passing in the US, a specialised court governs the distribution of the deceased’s property through a legal procedure called probate.
Usually, the court appoints a person to settle the debts and the remaining property to the designated properties. The property is passed onto the next of kin without a will according to the state’s probate law. In the following section, we’ve outlined tips for seniors to avoid probate.
Factors to Consider
To avoid probate, it is crucial to be informed about tax considerations, property ownership, and possible changes. It is also essential to consider the costs involved during probate, including attorney fees, newspaper publication charges, and filing fees.
The following touches upon the multiple ways to avoid probate. Depending on your situation, you may have to use one or multiple of these methods.
Make a Will
A will is an effective alternative for properties that cannot avoid probate. Although a will does not annul the possibility of probate, it can significantly save costs. In fact, it is a good idea to know more about simple wills to acquire more knowledge on making one that avoids probate. It is important to understand that not all property is exempt from probate.
Work With an Estate Planning Attorney
For beginners, all this legal jargon and procedure may seem overwhelming. Still, an estate planning attorney is a qualified personnel to guide you through the process. An attorney is experienced in dealing with various financial situations and clients with different personal goals, making them more reliable for sound advice for a solution that meets an individual’s needs.
Choose the Right Executor
The responsibility of dealing with the life savings of the elderly should be given to a reliable attorney. It is essential to assist them in choosing the right person with these attributes-
● Trustworthy. Financial exploitation of senior citizens is common. Make sure they choose a trustworthy person to handle their financial decisions.
● Attentive. An executor must be able to multi-task and attentive to detail to execute their will successfully.
● Fitness of the executor. These legal procedures can be long and exhausting. Hence, the executor must be in good health both physically and mentally.
Give Away Property As a Gift
One of the simplest ways for seniors to avoid probate is to give away their property. Although you need a portion of your property to sustain yourself, gifts can be part of a more extensive estate plan. However, remember that taxes are imposed once the gift amount surpasses a certain amount.
Remember that once a gift is given, you no longer own that property. The recipient can claim any property that needs to be probated if you don’t define it in writing.
Establish Joint Ownership
Seniors can avoid probate for real estate if they have joint ownership so that the property passes onto the surviving owner following their death. There are three ways this could happen:
- Joint tenancy with rights of survivorship. This is the classic type where the surviving owner retains the ownership of property.
- Tenancy by the entireties. This is essentially similar, but it is only applicable to married couples.
- Community property. This is applicable for married couples in the states of California, Alaska, Idaho, Arizona, Texas, Wisconsin, or Nevada.
For untitled property, a new deed must be recorded stating the survivorship intention; otherwise a property will be passed onto heir/heirs after death.
However, there are some drawbacks to joint ownership. For instance, a property may fall under a federal gift tax after exceeding a certain amount. Furthermore, you cannot get out of the property on sale or mortgage without the other party’s consent. Additionally, the whole property or a portion of it may be liable for estate tax purposes on behalf of the deceased owner. Finally, creditors or divorced spouses may claim their property rights.
You can also jointly own other property, including motor vehicles, boats, and businesses. The same obligations apply in these situations.
Pay-On-Death Financial Accounts
You can also name a beneficiary to transfer bank and financial accounts after your death by the process of Pay-On-Death (POD).
One of the benefits of this method is that the recipient has no claim on the property until the death of the owner. Moreover, you can also designate multiple beneficiaries but cannot choose successor beneficiaries. For instance, you can choose A as the recipient of your funds but not the beneficiary after the death of A. You will need to have a living trust or last will.
You can simply need to fill out a form from the bank or financial institution in order to establish the POD. After death, the funds are sent to the recipient and then the account is closed.
Transfer-on-Death Securities
Similarly, as in the case of funds, bonds, stocks as well as other securities can be transferred to a recipient upon death through Transfer-On-Death (TOD). Just like POD, successor beneficiaries are not applicable in the case of TOD.
Transfer on Death for Motor Vehicles
Not all states permit this. You will need to contact your state department that deals with vehicle titles to complete forms and other obligations to finalise the transfer. The states which allow this include:
- Arizona
- Arkansas
- California
- Connecticut
- Delaware
- Illinois
- Indiana
- Kansas
- Missouri
- Nebraska
- Nevada
- Ohio
- Vermont, and
- Virginia
Transfer on Death for Real Estate
In the case of real estate, you will need to record and execute a deed of Transfer-on-Death. Much like for motor vehicles, the TOD for real estate is only applicable for certain US states which include Alaska, Hawaii, Oklahoma, South Dakota, West Virginia, and Wisconsin.
Establish Living Trusts
If you own a large estate or have multiple beneficiaries, a revocable living trust can be made in order for seniors to avoid probate. Although an irrevocable trust also avoids probate, the owner will be unable to revoke it in any adverse situation.
The living trust is treated like a separate entity is the property title is transferred from you (the trustee) to the trust. Once the trustee passes away or becomes incapacitated, the appointed successor trustee may and then transfer the funds to the beneficiaries in the former case or manage the trust for the latter.
Remember that setting up a trust costs considerably more than drafting a will. For one, the attorney fees are hefty. However, you can save more money than in the case of probate, depending on the estate value.
Take Advantage of Small Estate Provisions in the Law
As the name suggests, many states allow estates below a particular value to be eligible for a simplified procedure and tax considerations. Furthermore, this clause also applies if there is joint ownership with a spouse.
Conclusion
Death is unpredictable. Nonetheless, it is essential to manage your assets well beforehand, so there are no legal battles following your passing. The aging population must have a solid financial plan and choose a reliable executor to handle these procedures. However, the ideal solution is to create a legally binding document early on to avoid probate.
Please note
These tips are designed to give you food for thought, but it is important that you seek professional advice if you are making changes to your legal and financial status. The tips are relevant in the US, and may not apply to all countries and territories.
