Thursday, January 25, 2007

Let Me Help You Avoid Probate

You read the title right - this attorney is giving free suggestions on how to help keep you out of court. Interested? Read on.

One of the goals of estate planning for most people is to avoid probate. To understand “why”, you have to start with the “what”, meaning, what is probate? Probate is the process of a court transferring the title of a decedent’s assets to his or her beneficiaries or heirs.

Why do you want to avoid probate? Because it is costly and time consuming. It can cost thousands of dollars in costs and fees and it can take many months to complete.

Why else do you want to avoid probate? To protect your privacy. Probate proceedings are public record, and with more and more court records becoming available online, it will be easier than ever for those records to be accessed by the general public.

The good news is there are ways to avoid probate.

The first way is to use the process of naming beneficiaries or transfer on death or payable on death (“TOD” or “POD”) designations. Michigan has a statute that clarifies this right. This method of contractually transferring title upon the death of the owner of the asset is available for items such as bank accounts, life insurance policies, and retirement accounts. If beneficiaries are designated, upon the death of the owner of the assets the financial institutions will transfer the assets directly to your beneficiaries so long as your beneficiaries follow their processing requirements.

But not all assets can be transferred using beneficiary designations. This is where a trust can be used to avoid probate. If the trust is properly created and funded, it will avoid probate as the successor trustee is able to privately manage your assets in the event of your passing.

Did you catch the word “funding”? That could be the most important word in this posting. The process of changing title of assets so that they are under the control of the trust is called “funding” the trust. A trust provides a plan for management and distribution of assets and designates the person, the trustee, to carry out that plan. But if an asset is not properly conveyed to the trust, then the trust has no control over that asset, and it is likely that a probate estate will need to be opened.

Probate proceedings are less burdensome then they were in the past, but there are still plenty of reasons to talk to your attorney about how you can avoid probate. So talk to your attorney about designing an estate plan to avoid probate, or to make sure that your existing estate plan will keep your estate out of probate court.

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