How Estate Planning Can Provide Alternatives to Probate CourtJul 01, 2016
Nobody wants to think of their loved ones fighting over assets after they’re gone, or paying extraordinary taxes for a diminished inheritance. Yet often, that’s exactly what happens if there is not a clear, coherent and current estate plan in place. While our firm is expert at expediting matters in probate court, we also can counsel clients on how to create a plan to avoid probate entirely through the use of family trusts and durable power of attorney, if appropriate.
Trusts and Family Limited Partnerships
Trusts and a Family Limited Partnership are legal entities which survive you after your death. Property held by a Trust or a Family Limited Partnership is owned by that entity and not by you. Since you no longer own the property, it is not part of your estate at the time of your death. Only property you own at your death is subject to probate, so the assets owned by these entities would not have to go through that process. The instructions for the management of your property are set forth in the Trust and Partnership documents, and the Trust or Partnership assets are managed by Successor Trustees or other Partners in the event of your incapacity or death. In probate, the court oversees the transfer of assets from the deceased to others, but since the assets already belong to these entities there is no need to have the court involved, and the Trust or Partnership operates outside the court’s supervision. By getting a Trust or Family Limited Partnership in place and transferring ownership of particular properties to it, you avoid the need to get a court involved either with a Conservatorship in the event of your incapacity, or probate in the event of your death.
Durable Power of Attorney for Property
A Durable Power of Attorney for Property can help your representative deal with property that has not been transferred to a Trust. This document enables your attorney-in-fact to handle your financial affairs and make last minute arrangements should your death be imminent. A common technique used by your attorney-in-fact, who is often your Successor Trustee as well, is to transfer property that is not currently held in your Trust into the Trust, so legal title to the property is held by the Trust at the time of your death. This removes your property from your estate for purposes of probate and puts it in the control of your Successor Trustee.
Direct to Beneficiary
Property can also pass outside of probate if it goes directly to a beneficiary on the death of the deceased. This is true for example of insurance policies, pension plans, and bonds that have a named beneficiary. It’s true of property that is jointly owned with a right of survivorship. On the death of one owner, the other owner(s) own that person’s interest automatically. Bank accounts can also be set up to pass directly to a beneficiary when the person who set up the account dies.
Contact us to discuss these and other important estate planning options.