Probate is the legal process in which the assets, debts and other liabilities of the deceased (“decedent”) are determined and the remaining assets are distributed to decedent’s heirs at law (if decedent died without a will [intestate]), or to decedent’s beneficiaries (if decedent left a will). It is essentially a lawsuit whereby the state of domicile sues the estate of the decedent, pays off creditors with valid claims, determines and pays death taxes (federal, state, gift and generation skipping taxes, where applicable), and distributes the remaining assets to the rightful parties. Sounds simple enough, right? SYKE! It’s not. There’s a process. A lengthy, expensive, public process in which state law governs, so you and your family lack control over the proceedings. Bonds may be required to be posted. Personal representatives are paid a fee for administering the estate. Lawyers are paid legal fees for their services. And all of these fees are coming out the decedent’s estate, thereby diminishing the amount of money left to the family. And if that’s not enough, you know how crazy acting your people get when there’s a death in the family. Grandma had a will drafted that nobody can find. Everybody feels entitled to something, even if they ain’t spoke to the decedent in years. Auntie didn’t even like her and everybody knows it, yet she’s first in line to stake her claim. Maybe babies come out the woodworks cutting into the shares of the kids that dad knew and loved. Ex-spouses who were to receive under outdated wills, arrive ready to collect, knowing the deceased spouse wouldn’t’ve left them shit (yes I made up a word with double apostrophes; it should be a word, and I use it so much my iPhone recognizes it as legit). The list goes on. We’ve all been there, and if you don’t plan accordingly, you’ll do this to your friends, family and loved ones when you pass. It doesn’t have to be this way, so it shouldn’t. Having a will alone, will still subject you to probate court, but it’s better than not having one at all, because the will at least provides the court with some guidance as to what you would want to happen.
Avoid Probate Using Beneficiary Designations
If you have retirement accounts, bank accounts, stocks and bonds or the like, DO NOT make yourself a beneficiary. Doing so, puts all of the assets of those accounts into your taxable estate and into probate. Instead name a person whom you want to receive those assets directly, so that they will in fact receive them directly and those funds won’t be a part of your taxable estate. Life insurance is also good for beneficiary designations, however, if you are the policy owner, the amount of the policy is still considered to be a part of your taxable estate, even though someone else is named as the beneficiary. Contact our office to find out how to avoid this result.
A living trust is in essence a will substitute that avoids probate when drafted correctly. It effectively takes all of your assets out of your taxable estate because the trust, which is its own entity, is the owner of all assets. With nothing to your name at death, there’s nothing to probate. The trustee named in your living trust is responsible for distributing your assets to the named beneficiaries in your trust. You are in control! No one can come try to claim anything because if they’re not spoken for in the trust, they gets nada. That simple. Everything can be distributed as quickly as it takes the trustee to get it done. No court processes. No lawyer fees. Just a straight transaction.
Property can be owned jointly a number of different ways (tenancy in common, tenancy by the entirety, joint tenancy, joint tenancy with rights of survivorship), but to avoid probate, you want to title property as joint tenants with rights of survivorship. Under this form of property ownership, the tenants have equal rights to the property while living, and upon the death of one of the co-tenants, the surviving tenant enjoys full ownership of the property without the property having to go through probate or be a part of the decedent’s taxable estate. The heirs or beneficiaries of the co-tenant that died has no rights whatsoever in the property owned by JTWROS.
The moral of the story is avoid probate at all costs. Nobody wants to go to Probate Court. Nobody! Your loved ones already have to deal with the pain and consequences of losing you, they definitely don’t want a lengthy drawn out (and expensive) court process to continually remind them that you’re gone.
Lerae Funderburg, Esq. is the Managing Attorney at Funderburg Law, LLC, an Atlanta based law firm specializing in estate planning and entertainment and business transactions. If you are local to Atlanta, call and set up a consultation! She would love to hear from you!