We are living in a very strange and difficult time. Thanks to Covid-19 many of us are contemplating our mortality. As Daily Money Managers we always talk to our clients about the inevitability of death and how to protect family assets. The way to do it is through Estate Planning.
Many people are uncomfortable talking with their loved ones about the details of Estate Planning. Questions concerning who will serve as an executor, how the estate will be divided amongst their heirs, and even when the appropriate time is to plan an estate, can be hard to initiate. Naturally, there can be a great deal of discomfort when it comes to considering the future of one’s wealth and assets. While there are a great deal of reasons why it is crucial to push past that discomfort, one that is often overlook is avoiding probate.
So, what exactly is probate? In simple terms, probate is the court-supervised process of settling a decedent’s estate and distributing their property to their heirs. This involves proceedings that are public record to determine any debts, taxes and fees owed by the estate, a list of assets of the decedents, and eventually the distribution of those assets to the listed heirs according to a will.
Among the reasons to avoid probate, the two most often cited are time and money. Because probate is a court process that includes proceedings and hearings in a public setting, the act of gathering assets and paying debts of an estate in probate can often take months, or even years if the will or any provisions in it are contested, delaying the distribution of any assets to heirs until after it is over. Probate is also not a free process – the estate in probate is responsible to covering probate fees, as well as any probate attorney’s fees should the court deem one necessary for the process. Since probate is a public process, anyone can search and find information about the distribution of the estate’s assets, including their value and to whom they are given. This can lead to any number of people contesting the will in probate, delaying the process further while making it even more costly.
By avoiding probate, the beneficiaries and heirs of an estate make the process of executing the will and distributing assets according to the decedent’s wishes faster, more affordable and private. To successfully avoid probate, assets must be passed directly to heirs rather than through a will. A common ways to accomplish this is to establish a living trust, in which the owner of any assets (the grantor) they wish to pass on to others retains control over those assets in a trust that names a successor trustee who will distribute all assets in the trust according to the grantor’s instructions after their death. In the case of the distribution of property through a living trust, probate law and probate court are not involved.
Another method of avoiding probate on financial assets is to name beneficiaries to your accounts. You can read about that in a future blog post.
At New York Financial Organizers we are firm believers in the benefits of preventative and preemptive Estate Planning. We always recommend speaking with a seasoned Trust and Estate Attorney to help prepare the documents. We have relationships with a number of attorneys and would be happy to refer you to one that we think matches your needs. Don’t hesitate to contact us at info@nyfo.nyc if you have any questions.