Each year millions of dollars are spent on soaring attorney and court fees associated with probate proceedings upon the death of a loved one. Avoiding probate in estate planning allows the decedent's property to be distributed to the designated person at a designated time without substantial costs. How can you ensure that your family won't have to deal with the stressful, tedious, and time consuming probate process after your death? Read on.

A Quick Background on the Probate Process
Probate is the process of proving the will is in fact the last will and there are no challenges to it, and of adjudicating any claims against the estate under court supervision. Probate usually occurs in the appropriate court in the state and county where the deceased permanently resided at the time of his or her death. If there is no valid will (called intestacy), title to the property will pass under state intestacy laws to "heirs at law," normally giving one half to the surviving spouse and dividing the remainder equally among the children. With or without a will, the property must go through the probate proceedings.

Even if a person dies with a will, a court generally must allow others the opportunity to contest the will. Creditors are allowed to step forward; the validity of the will can be scrutinized; and the deceased's mental capacity at the time the will was drafted can be questioned. These proceedings take time and money, and your heirs are the ones who will have to pay. Since probate proceedings can take up to a year or two, the assets are typically "frozen" until the courts decide on the distribution of the property. The entire process is made public for everyone to see your financial and personal matters, and the attorney fees can add up: appraisal costs, executor's fees, court fees, legal and accounting fees, and surety bonds. Probate can easily cost from 3% to 7% or more of the total estate value.

Simplifying or Possibly Avoiding Probate Altogether
Even though probate takes place regardless of whether you made a will, you can look to other tools that help your inheritors:

1. Transfer property to a trust - Revocable living trusts or inter-vivos trusts were invented to help people bypass the probate process. Unlike the property listed in your will, the property in a trust is not probated, so it passes directly to your inheritors. You simply create a trust document and then transfer property title to the trust; many people name themselves as trustee to keep total control of the trust property. A trust also allows you to name alternate beneficiaries, does not require a waiting period after death, and is much harder to attack in court.

2. Set up payable-on-death registrations - Also known as transfer-on-death accounts, these allow you to name one or more beneficiaries of the account to avoid the probate process. It's simple to create and usually free, and the beneficiary can easily claim the money after the owner dies. The ability to name a beneficiary, however, is a feature that you must add to the account, but most banks, savings and loans, credit unions, and brokerage firms allow you to do so. It requires some extra paperwork and time, so you'll need to be persistent and ask your institution for the required forms.

3. Make tax-free gifts - Making gifts helps you avoid probate for a very simple reason: you no longer own the property when you die. As of 2004 you can give your heirs up to $11,000 (indexed for inflation in future years) per person each year without a gift tax penalty. Giving before you die helps lower your probate costs because, typically, the higher the monetary value of assets going through probate, the higher the probate costs.

4. Revisit the beneficiary designations on your stuff - Dust off that old life insurance policy and make sure your beneficiaries are up to date. Too many times individuals forget to change their beneficiary after their second marriage, and then the ex-spouse gets everything. Call your custodians and update the beneficiaries on your IRAs, 401(k), life insurance polices, annuity contracts, and other retirement accounts. (See Problematic Beneficiary Designations.) These types of accounts pass at your death by contractual beneficiary designation, meaning whoever you name in your will is irrelevant to these accounts; beneficiary designation will take precedence in court. Avoid naming your estate as beneficiary, which will cause your property to go through probate.

5. Use joint ownership - 'Joint tenancy with right of survivorship,' 'tenancy by the entirety', and 'community property with right of survivorship' are the types of joint ownership that allow your property to bypass the probate process. If you hold your stocks, vehicles, home, and bank accounts in joint ownership, the title of the property automatically passes to the joint survivor upon your death. Remember, once you title your property jointly, you'll be giving up half ownership in the property.

Although we've demonstrated some weaknesses of having a will as your sole estate planning tool, don't think that you no longer need one. The guidelines above point out great tools to build a more effective plan; however, do draft a will to cover property acquired shortly before you die or anything that might have been overlooked. A good estate plan should distribute a decedent's property when and to whomever the person desired, and with a minimum amount of income, estate, and inheritance taxes, and attorney and court fees. Avoiding probate is an important part of achieving these goals.

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