Probate is the process of administering the estate of the person who passed by gathering their assets, paying their liabilities, and distributing the remaining assets to the beneficiaries.
Trusts, when properly setup and funded, can avoid probate. The question is: Does a will avoid probate?
Does a Will Avoid Probate?
There are a number of ways to avoid probate. For example, you can spend or give away all of your assets so when you die, you have nothing to pass along. Another example is by adding joint ownership with the right of survivorship to an asset, so the joint owner takes control automatically after your passing. A third example is by designating a Payable on Death (POD) or Transfer on Death (TOD) and other beneficiary designations on your financial accounts. A Life Estate could be another potential solution. Finally, you can avoid probate by properly setting up and funding of a trust.
The benefits of joint ownership with rights of survivorship and a POD or TOD designation is they are easy to setup and inexpensive. However, joint ownership does not offer asset protection for beneficiaries, gives up ownership of the asset, and is subject to potential liability of the joint-owner. A POD or TOD designation also does not offer asset protection for beneficiaries, can cause a loss of Government Benefits for a beneficiary with a disability or special needs, and does not help with potential future incapacity.
With a life estate, you do not own entire interest in the property. The interest in the property is split into two pieces, the current interest and the interest the other owner (the remainderman) has after your passing. You cannot harm the remainderman by damaging or harming the property. Additionally, if you wish to sell the property, you can only sell the portion you own, your life estate, and you would need permission from the remainderman to sell the entire interest.
A properly setup and funded trust can solve these issues. A trust can give possible asset protection for beneficiaries. With a trust, you can retain control of assets. A trust has the ability to protect beneficiaries with disabilities or special needs. Finally, a trust can plan for incapacity. The only negative of a trust is the initial setup cost.
Assets controlled by a will do not avoid probate. A will by its nature directs the assets through the probate process for administration and ultimate distribution to the beneficiaries.
Why Should I Avoid Probate?
The answer is simple. Time and Money. The probate process generally takes longer and costs more to administer than a trust, a POD or TOD, or joint ownership to avoid probate.
Estate Planning Strategies With Heritage Law Office
Contact one of our attorneys at our Wisconsin (414-253-8500), Minnesota (612-204-2300), or California (310-438-4020) locations to make sure your assets are properly protected or for more information on a Trust, Will, Life Estate, Medicaid Planning, or Estate Planning.