How To Avoid Probate: 5 Ways To Keep Your Estate Private After Death

Before you pass away, estate planning can help ensure that your property and assets are distributed to your designated beneficiaries. The legal process that oversees the distribution of your estate when you die is called probate.

A probate court follows instructions outlined in a will or distributes property to the next of kin in the event no will exists. In some instances, however, you may want to keep your finances private following your death – and prevent your loved ones from entering probate altogether.    

So, how do you avoid probate court? Below, we’ll walk through a few reasons you may wish to avoid probate. Then, we’ll discuss a few strategies that can help you transfer your property and assets without involving a probate court.

What Is Probate?

Probate is a public court process that examines the contents of an estate and then distributes them, either in accordance with a will or by operation of law. But the process of working with a probate court can often take anywhere from 6 months to 2 years to conclude. Probate also comes with a variety of expenses, including attorney’s fees, publication charges and filing fees.

A probate court will also make the deceased’s personal finances a matter of public record. The court will publicly share information about outstanding holdings and debts as well as the deceased’s value and the types of assets they held. Some people may prefer to sidestep the public airing of their estate and employ a range of legal tactics to avoid it.

Why Would You Want To Avoid Probate Court?

Avoiding probate court can benefit you and your deceased kin in several ways. Below are some of the most common reasons you may not want your assets publicly aired and transferred in probate court.

Privacy

Most people won’t want their finances, or the finances of their heirs, to be made public in probate court – even in death. This can be especially important if you don’t want any debts owed after death or large inheritances publicly aired in court. Avoiding probate can help you keep sensitive personal financial matters private.

Cost

Costs such as filing fees, newspaper publishing fees, attorney’s fees and other outstanding items are also associated with probate court. In many cases, these expenses can quickly add up. Staying out of probate court allows you to keep more money in your pocket (or the pockets of your heir).

Keep in mind that even more expenses can be accrued throughout the probate process if a will isn’t in place.

Time To Settlement

The time it takes to settle your estate is another reason you may want to avoid probate court after your death. Courts move slowly and carefully to ensure that estates are properly distributed and debts are handled. However, this can be a distinct disadvantage for your heirs if they’re dependent on the financial windfall that the estate stands to provide.

5 Ways To Avoid Probate Court

By avoiding probate, you can ensure that your descendants keep their financial affairs private. Staying out of probate court can also minimize the cost, time and headaches associated with the transfer of assets to your heirs.

Let’s walk through some of the strategies to consider if you wish to avoid probate court.

1. Transfer Property To A Revocable Trust

A revocable trust, also known as a living trust, allows owners to retain control over property during their lifetime, with the property passing to the trust’s designated beneficiary at the time of their death. It’s often a preferred choice for those with sizable estates that will be left behind, or if a large number of beneficiaries stand to inherit.

A living trust is called a revocable trust because you also have the opportunity to revoke it at any time.

To create one, you’ll need to work with an attorney to execute a document that establishes it. At this time, a separate legal entity (the trust) is created and all property is transferred to it. If you should happen to pass away, someone you’ve designated as a trustee will handle the distribution of property to the trust’s designated beneficiaries.

Note that if you’re planning for the well-being of dependents with special needs, you may wish to consider establishing a special needs trust instead.

2. Give Away Your Property

Another way to avoid entering probate is to transfer your property to loved ones before you pass away. Many states have probate estate limits, so you may be exempt from going to probate court if your estate is considered small enough. For example, an estate with a will in New York must go to probate court if the estate is valued at over $30,000.

Transferring your assets prior to your death can also benefit your loved ones. That’s because these properties may make a significant impact on their living situation, financial portfolio and overall well-being or quality of life.

Of course, if you do decide to gift valuable property, you’re agreeing to give up control over these real estate holdings. You may also trigger gift taxes or IRS reporting requirements, just as you would when gifting stocks and real estate. Keep in mind that IRS rules generally apply to gifts of $17,000 per individual or $34,000 per couple.

3. Create A Will

Creating a will is a great way to ensure all your possessions will be distributed to your designated beneficiaries. While having a will doesn’t avoid probate, it can help speed up the process significantly. Making a will can also greatly reduce costs that can be accrued during the probate process, compared to passing away without a will in place.

4. Prepare Payable-On-Death Accounts

Many types of assets – particularly savings, investment or retirement accounts, and life insurance policies – ask you to list beneficiaries. These assets are known as payable-on-death (POD) or transfer-on-death assets or accounts. To convert your assets to POD accounts, all you have to do is fill out a form where you name your beneficiaries. 

Upon the death of one who owns a given account, ownership is automatically transferred to the named beneficiaries. POD accounts go directly to your beneficiaries without having to go through probate court.

5. Take Advantage Of Joint Ownership

You can avoid probate on property that involves joint tenants with right of survivorship (JTWROS). In effect, if one of the two current owners of an estate passes away, upon their death, title to the property automatically goes to the surviving owner.

This process happens automatically between spouses, but a surviving spouse may also want to consider making a child or several children joint owners so ownership immediately passes to them upon the death of the surviving spouse. Be advised, though, that making a child a JTWROS constitutes a gift in the eyes of the law, which may trigger the gift tax situation mentioned above.

In essence, different types of property (real estate, boats, cars, equities and financial securities) can be held jointly. Many of these items must have a title document indicating this joint ownership.

Frequently Asked Questions

Are you still wondering how to avoid the probate process? Below, we address some FAQs about avoiding probate court.

Does preparing a will avoid probate?

A will doesn’t always have to be probated. For example, if you live in a state where your property and assets are lower in value, your heirs may be able to circumvent the probate process – even if you have a will.

The specific rules that determine whether your beneficiaries need to go to probate court (with or without a will and testament) largely depend on the state you live in. 

Can property be transferred without probate court?

Your property can be transferred to your beneficiaries without entering probate, and this is possible in a few ways. Common methods include transferring your property to a living trust, gifting property before you pass on or making a beneficiary a joint owner of your property.

Do I need a trust to avoid probate?

No, you aren’t required to open a trust in order to protect your property and assets from probate. However, it can be helpful to open a living trust if you have a large estate or you’re naming many beneficiaries to inherit your assets.

The Bottom Line: Avoiding Probate Can Streamline The Transfer Of Your Estate

Engaging in the process of estate planning won’t just help you avoid probate. It can also help you and your heirs create a working plan for the future – and put solutions in place that can help protect your inheritors’ privacy and financial health, long after your passing.

Before planning how you’ll distribute your property and assets, it’s important to have an understanding of your complete financial profile. Want to learn more about how to manage your finances? Create a Rocket Money℠ account today.