It is possible to avoid probate with estate planning.
For many, probate sounds like a scary word.
Although probate is essentially the process for settling an estate in the local court, it can produce anxiety.
Probate is often associated with lengthy proceedings and greater tax consequences.
These negative aspects of probate are heightened when a person dies “intestate,” which means without a valid last will and testament.
According to a recent Nj.com article titled “How can we avoid probate and avoid taxes for our children?,” every American should have a last will and testament to avoid intestacy.
A last will must be submitted to the probate court for the estate to be settled within the statutory timeframe.
In Kansas that timeframe within six months of death, but in Missouri that timeframe is one year.
Even with a last will and testament, probate can take time to settle debts, pay taxes, and distribute assets.
For those with contentious family, the proceeding can be dragged on further through will contests.
Some people may find a last will is sufficient to meet their estate planning goals.
Others may find they need to avoid probate.
How does one avoid probate in estate planning?
Some assets can be jointly owned with rights of survivorship.
In this case, the property will transfer with full ownership to the surviving party when the other party dies.
Accounts with beneficiary designations can also avoid probate when a person rather than the estate is designated as the beneficiary.
Beneficiary designations are found on a variety of assets like annuities, life insurance policies, payable-on-death accounts, and retirement accounts.
In Kansas and in Missouri, real estate title may pass outside probate postmortem via a “transfer on death deed” in Kansas and a “beneficiary deed” in Missouri.
Another way to avoid probate and keep your affairs private is to create a “funded” revocable living trust to hold your assets.
Once you have funded your living trust, the assets titled to the trust are no longer a part of your probate estate.
Instead, your assets are distributed based on the instructions provided within your trust document.
A trust is also useful in bypassing ancillary probate.
What is ancillary probate?
Ancillary probate is a simultaneous proceeding for passing real estate owned outside of the state of residence of the decedent.
Utilizing certain trusts in your estate plan may not only help you avoid probate, but doing so can also minimize estate taxes.
Currently, federal estate taxes are only due if you own more than $11.7 million as an individual or $23.4 million as a married couple.
This threshold could certainly be lowered by the federal government.
Some states also levy estate taxes and inheritances.
Depending on your state of residence, tax planning may be at the top of your estate planning priorities.
If you desire to minimize taxes or avoid probate, you should work with an experienced estate planning attorney to create a plan to meet your needs.
Reference: nj.com (March 24, 2021) “How can we avoid probate and avoid taxes for our children?”