As a previous post highlighted, the estate planning process often revolves around various desires and expectations. For some residents in Michigan, this means carefully drafting an estate plan so that they can avoid the probate process. While probate is not an entirely negative process that must be avoided, it can be long and costly. And, if you seek to help out your beneficiaries after your death, it is possible to take specific measures to help ensure that probate can be avoided.
What steps can you take to avoid probate? In order to avoid probate, a testator must take the time to transfer assets out of the probate process. There are four ways to accomplish this process and to pass your property on to your heirs and beneficiaries without the involvement of the probate system.
Joint property ownership with the right of survivorship helps people avoid the probate process for one simple reason: When you die, your ownership ends and it passes onto the living joint owner. In order to create such a situation, there must be a joint tenancy with a right to survivorship, tenancy by the entirety or a married person is living in a community property state.
Another way to avoid probate is by naming death beneficiaries. This is available for most types of financial assets and instruments. You are able to designate a beneficiary to receive the asset upon your death. Common assets are payable of death accounts, retirement accounts and transfer on death registrations.
A revocable living trust is a common way to transfer property and assets to beneficiaries without the probate process. This requires you to transfer the property to a trustee who will hold the property for your benefit. Thus, the trust now owns the property, but the trustee is required to use it for your benefit under the terms of the trust.
Finally, probate could be avoiding by gift giving. This is often overlooked because it requires specific planning. However, this is a viable source to avoid probate on smaller, less valuable assets. It should be noted that gift taxes will apply if the gift is in excess of a certain amount. Thus, it is typically only a viable option for those gifts under that threshold.
No matter the reason for wanting to avoid probate court, it is important to understand which mechanisms can be used to avoid it. This can help ease the estate planning process, making it more successful.
Source: Findlaw.com, “Avoiding the Probate Process,” accessed May 28, 2017