By passing Probate

admin — Fri, 20 Feb 2009 02:03:17 +0000

Probate is a tedious legal process in which the court validates the will of the decedent and directs the distribution of the estate. If not handled properly, probate opens another pathway to the poorhouse for the surviving heirs. It is time-consuming, frustrating and often costly. The various costs associated with probate are staggering: attorneys’ fees, compensation for executors or administrators, court filing fees, appraisal fees, advertising expenses and other expenditures needed to defend the estate against will challenges and disputed claims of creditors. The sheer length of time it takes to complete probate proceedings has pushed many people to scramble and find ways to structure their finances with a view of passing their substantial properties to their designated heirs without passing through the proverbial eye of the needle called the probate court.
Asset protection and privacy are other powerful motives why high- profile people (corporate moguls, politicians, media personalities, and movie stars) seek ways to avoid probate because they wish to keep the size of their estate and the identity of their beneficiaries confidential. Any public disclosure of assets may lead to real threats from prying eyes. The sweet aroma of a vast empire will surely attract the attention of predators. Others skirt probate out of a realization that their heirs should be spared from emotional upheavals they will surely experience while the will is undergoing probate, “Technically,” wrote the editors of American Lawyer and Court TV, “the only property subject to probate is that for which there is no other legal mechanism for shifting title to a new owner.”
Lawyers have devised various techniques to help their clients avoid the expenses and delays caused by probate proceedings. In the United States, persons with estates to pass on to their heirs have several options to bypass the probate court to distribute assets to their spouse and children.
Many property owners set up a popular form of trust called the “revocable living trust” that is properly given to a trustee (a friend, relative, or business adviser chosen by the person.setting up the trust to manage for the benefit of the settler or the person who sets it up). When the settler dies, the trustee must pay the deceased’s debts, taxes, and expenses, including the fee of the trustee and the expenses of maintaining the trust property, and then turns over the balance of the estate to the beneficiaries. For estates that have moderate sums of money, American banks have special bank accounts that do not require any trustee called “Totten Trusts.” These simple and inexpensive trusts may transfer the designated funds to the beneficiary upon the death of the settler. Many Americans have found it convenient to jointly own a real estate property that will pass directly to the survivor, and life insurance proceeds that will go directly to their beneficiaries.
Belli and Wilkinson revealed that some of the common methods used by Americans to avoid probate include
1) entering into joint tenancy (when two or more people own property as joint tenants, title automatically transfers to the surviving owner upon the death of the joint tenant);
2) giving gifts during your lifetime (for small or moderate sums of money);
3) getting a Totten Trust (you open a bank ac
count in your name as trustee for another person and you keep the power to revoke this “trust” at any time before your death);
4) purchasing a life insurance policy (the beneficiary is automatically entitled to the proceeds upon your death);
5) setting up a living (inter vivos) trust (you turn over everything you own to a trust which provides for you while you live and then distributes your assets to your heirs at the time your demise).
Elliot & Debra Raphaelson in their book How To Be Your Own Financial Planner (1990) advised Americans that if they have a lot of assets and they want the property settlements to be private, a living trust might be for them. Some of the property will pass through contract or law instead of through probate. For example, property that passes to a named beneficiary, like life insurance policies (IRA, Keogh accounts and United States savings bonds) passes by contract, not probate. To skirt probate, many Americans get life insurance policies and name a living individual as their beneficiary and a contingent beneficiary who will take the proceeds if the primary beneficiary is not living at the time of the insured’s death.
Many of them do not want the benefits to be paid into their estate, which is what will happen if there is no living beneficiary. Paying money into the insured’s estate will necessitate court action, whereas proceeds of a life insurance policy will ordinarily be paid to the beneficiary without regard to the terms of the deceased person’s will, and without court probate proceedings.

WL-CERAMIC » Law and legal

By passing Probate