For many people in Michigan, the loss of a loved one often means a lengthy estate settlement process that can fray nerves, reduce the value of the estate, and delay inheritances for months or even years. If you have loved ones who are dependent upon you for their financial wellbeing, those frustrations, costs, and delays are something that you should take into consideration during your estate planning efforts. After all, you don’t want your death to create added emotional and financial hardship for your dependent loved ones. The good news is that avoiding probate is easier than you might imagine.
Solid Reasons to Avoid Probate
While most people don’t seem to worry about the need to avoid probate – surveys suggest that most of us haven’t even created a will – there are some very sound reasons to do so. Probate is a lengthy and costly process with high legal costs and administrative expenses that can substantially reduce the size of your estate. That reduction in your estate’s value means that there will be less left to pass on to your heirs. Often, those heirs can experience financial pain as they wait for your estate to settle. Even those who are entitled to receive an allowance from the estate during the probate process often find that it is not enough to maintain the standard of living you provided during your life.
Naturally, there are some naysayers who will tell you that you’ll save more money by creating a will and allowing the estate to go through probate. They’ll point to the higher upfront costs associated with more complex estate planning like living trusts, and suggest that probate costs will be more bearable. In theory, that probably sounds like a reasonable argument. The fact is that it typically will cost a little more money to set up living trusts or use other estate planning options. Wills are generally less expensive – in terms of upfront cost, that is.
The probate process, however, can quickly even out those costs. There are attorney’s fees that must be paid. The executor is typically entitled to payment for his services. There are court costs, and various administrative expenses that accrue during the process. Specialists like appraisers, accountants, and tax professionals may have to be hired. By the time the process is complete and the estate is fully settled, a sizable percentage of its total value may be gone forever – leaving your heirs with less of an inheritance than you probably planned. While your initial outlay might be somewhat higher with more complex estate planning, the money you save in the long run will help to ensure that your heirs receive the inheritance they need.
A Trust Can be Great…
When it comes to probate avoidance, there is probably no more talked-about tool than the living trust. With a living trust, you can not only ensure that your asset distribution goes as planned but also provide you and your family with additional peace of mind. By naming a successor trustee to take care of your assets when you’re incapacitated or dead, you provide your loved ones the assurance they need to know that their needs will be met regardless of anything that happens to you.
Trusts also avoid probate, since the assets contained within the trust are no longer owned in your sole name. The terms of the trust ensure that the trustee has the instructions needed to transfer ownership of assets when you’re gone, eliminating the need for any court involvement. And since there is no court-supervised activity, many of the costs associated with probate can be avoided altogether. Finally, trusts come in a variety of forms, making them flexible enough to meet almost any specific asset distribution need you might encounter:
- If you have a spendthrift heir who wastes every penny that falls into her hands, you can use a trust to protect her inheritance from her own poor choices.
- A special needs trust can be used to preserve a disabled heir’s critical government benefits, while still enriching and enhancing his quality of life.
- Charitable trusts can be used to provide immediate tax benefits to you, even as you ensure that your giving lives on even after you’re gone.
- If you have a furry friend, you can make sure that his or her life continues to be comfortable and rewarding after your death.
- There are many other trust types as well. Be sure to ask your estate planning attorney whether one is right for you!
… But Don’t Forget Other Probate Avoidance Techniques Too
Trusts are not the only probate avoidance tool you can use. There are other simple techniques that can help to ensure that your assets are transferred without the need for costly probate procedures. For example:
- Joint Tenancy can be used with real property, and provides a way for that asset to transfer directly to the surviving tenant when one of you dies. When a husband and wife own property in this manner, it is referred to as “tenants by the entirety.”
- Life insurance doesn’t need to be probated – if you have a valid beneficiary listed on the policy.
- You can use payable-on-death designations with bank accounts and stock brokerage accounts. This enables you to list someone as the beneficiary of those accounts so that they can claim ownership as soon as you die – without waiting for probate.
- Gifts can also be used to transfer property before you die, thus avoiding probate. You should only use this technique in consultation with an attorney, however, since there may be other ramifications for your estate.
If you need to bypass the probate process, these techniques and tools can help you accomplish that goal. With them, you can ensure that your dependent heirs have access to their inheritance as quickly as possible when you’re gone. As always, however, it is wise to consult with a competent probate and estate planning attorney before any probate avoidance strategy is developed. At Biddinger & Estelle, PC, we can help you decide which strategies are right for you, and create the perfect plan for your needs. If you’re interested in avoiding probate, contact us at our website or call us today at (989) 872-5601.