There are multiple reasons why people may want to keep their valuable assets out of probate court. Waiting for the completion of estate administration might leave beneficiaries without the support a testator intended to provide for them for months.
Assets that pass through probate court increase the value of an estate and may potentially lead to costly estate taxes. Creditors, including health care providers, credit card companies and even the Medicaid estate recovery program, could make claims against assets that pass through probate court.
For many people, preserving resources by keeping them out of probate court is a top estate planning priority. There are a variety of different estate planning tactics that can help people preserve their resources by keeping them out of probate court, including the three below.
Funding a trust
Trusts are legal entities created to manage and distribute certain resources. There are a variety of different types of trusts that people can establish depending on the assets that they want to protect.
Assets held by a trust are not part of an estate and are therefore typically not at risk of creditor claims and do not increase the likelihood of estate taxes applying.
Arranging for direct asset transfers
It is theoretically possible to have specific assets transferred directly to chosen beneficiaries. Testators can add transfer-on-death designations to financial accounts, such as their retirement savings accounts. After they pass, their selected beneficiaries can take a copy of the death certificate and state identification to the financial institution to assume control over the account. Such arrangements give the testator total control over their resources until they pass, at which point the person they selected ahead of time can take control of the account.
Adding co-owners
If a homeowner wants their house to become the property of their child who acts as a caregiver or their new romantic partner, they can execute a deed to add them as a co-owner. Holding title in the right way, possibly as joint tenants with rights of survivorship, can make it easy for a co-owner to assume control over a home when the testator dies. People can also add co-owners to their financial accounts or even the titles of their vehicles in some cases.
With the right planning, people can protect specific resources from probate complications. Discussing personal assets and estate planning goals with a skilled legal team can help people select strategies that work for them given their circumstances.