To Probate, or Avoid Probate? That Is The Question— What Everybody Ought to Know About Estate Planning.
No one wants to think about that day you will no longer be among the living. However, it’s an inevitable fact of life. How you plan for end of life can determine if your family and loved ones will be left with peace of mind, or scrambling trying to determine your wishes. This is why estate planning is key. Effective estate planning can achieve various goals. For example:
- Distribution of assets
- Provide guardians for minor children
- Provide creditor protection for beneficiaries
- Reduce federal estate taxes
Many of my clients ask similar questions during their estate planning consultation. As a result, I’ve compiled answers to the 7 most popular questions and commonly held beliefs about estate planning everyone should understand before meeting with an experienced estate planning attorney. Here we go:
Q: “What is probate?”
A: Probate is a court supervised legal proceeding for transferring a decedent’s property to his or her heirs. Probate is required if you die intestate (without a Will), or if you own “probate assets” at death. Probate administration is not private, as a result, all of your financial and familial matters are public record. I counsel my clients to implement probate avoidance strategies to preserve privacy, ensure the speedy transfer of assets, as well as control costs.
Q: “What’s considered a probate asset?”
A: Probate assets include any asset in your individual name without a beneficiary designation or a survivorship. They do not include retirement assets (401k, IRAs), life insurance, or property owned as joint tenants with survivorship or tenants by the entirety. A Will controls the disposition of probate assets.
Q: “What about my bank accounts and brokerage accounts? Are there any tools that can be implemented to avoid probating these assets?”
A: If your bank accounts are not jointly owned, then you must add a Payable on Death “POD” to the account. The POD designation will effectively avoid probate and the asset will pay over to the named beneficiary upon the death of the account holder. For brokerage accounts that holds your marketable securities, you can add a Transfer on Death “TOD” to the account to avoid probate.
Q: “If I die without a Will, what happens to my assets?”
A: In Florida if you die without a Will (intestate) the Florida Probate Code will dictate who inherits your assets pursuant to its rules of intestate succession. The assets will be distributed in probate in accordance with Florida’s intestate statutes. It takes into account the degree of “closeness” a relative is to you by law to determine their share of your estate. Under these rules, a long- time partner that is not your spouse would have no standing to inherit. Nor would your feelings about a relative be taken into consideration.
Q: “What documents should my estate plan include?”
A: A basic estate plan should include a properly executed Will and a Trust. Additionally, in case of incapacity, your estate plan should include a Durable Power of Attorney, a Healthcare Surrogate Designation, and a Living Will. These documents can minimize a lot of family conflict and drama. For example, without a Durable Power of Attorney, your family may be forced to go to court to get a conservator/guardian appointed which is expensive and time consuming. Furthermore, a Healthcare Surrogate Designation form allows you to name someone to make medical decisions on your behalf if you become incapacitated.
Q: “I have a Will, so probate is not an issue for me, right?”
A: A Will is a legal document that outlines how you want to distribute your assets after your death. However, having a Will does not necessarily mean you don’t have to probate an estate. Many of my clients are under the impression that a Will is all they need to avoid probate. However, a will and probate are two totally separate concepts. If you own assets in your individual name without “designated beneficiaries”, the asset must go through probate regardless of a Will. The probate process moves the assets out of the decedent’s name and distributes them to the heirs in accordance to the Will.
Q: “What are the benefits of a Trust?”
A: Trusts are a great probate avoidance tool that can hold assets for a beneficiary, as well as incorporate estate tax savings provisions. Trusts also provide lifetime management of trust assets, and maximum control over trust assets.
There you have it, the 7 most common questions clients ask about estate planning. Did any of the answers surprise you? There are some great tools that an experienced estate planning attorney can implement to save you the expense, drama, and time of probate administration. If you’re ready to learn more, feel free to schedule a complimentary estate planning consultation at your convenience.