WHAT IS PROBATE
Does My Estate Have to Go Through Probate?
We get a lot of questions about avoiding probate, but frequently clients don’t know exactly why they should be avoiding probate. Most clients would be best served by avoiding probate, even if they aren’t sure exactly why. As previously discussed, probate can be a costly, stressful, and long process. It can inflict an additional burden on your loved ones, who are likely still grieving. Don’t let your assets be wasted on litigation or probate fees when you can take care of many aspects of your estate now.
What is Probate?
Probate is the process the court uses to oversee the distribution and management of someone’s estate after death. This is when the court validates the decedent’s last will and testament, final expenses are paid, tax returns on the estate are finalized, and the decedent’s property is submitted to the proper beneficiaries. Depending on the size of the estate, the assets involved, the family dynamics, and many more variables, the process can take anywhere from a few months to several years to complete.
Why Do I Want To Avoid Probate?
Oftentimes, it seems like hiring a probate attorney and filing a probate proceeding seems daunting, making people want to put it off or avoid it altogether. It can be costly, take a lot of time, and place additional stress on the family in an already trying and emotional time. While probate cannot be avoided entirely, there are ways to reduce the number of assets that need to pass through an estate, which generally reduces the headache and the time it takes to get through the process. In Virginia, an estate requires probate if its value is $50,000 or more. In order to keep property out of an estate you must take steps to make sure assets transfer automatically to beneficiaries.
What Can I Do To Avoid Probate?
Set Up a Trust
For those with minor children, adult children, grandchildren, or anyone else that you want to protect inherited assets for, consider creating and naming a revocable trust as beneficiary of your assets. A trust can hold any type of property and make direct distributions to your beneficiaries as you direct. A revocable trust can be as specific or as general as you’d like and, after your death, will protect the assets you leave to your beneficiaries from creditors and potential lawsuits or divorce proceedings. A revocable living trust is a flexible document that can be modified or even revoked at any time and doesn’t add any tax liability during your life.
Whether you get a trust set up or not, you want to make sure that any accounts or insurance policies with beneficiaries are taken care of, as well. You have a few options, depending on the type of account or policy. For insurance and retirement accounts you’ll need to specify the beneficiary on the designated forms. You can designate an individual or an Irrevocable Trust as the beneficiary. Additionally, for most bank accounts you can ask your bank for a Transfer on Death (TOD) or Payable on Death (POD) form. This will allow you to specify where your account goes when you pass. If you have a revocable trust, that is a great option as the TOD or POD beneficiary of your accounts
Deeds for Real Property
The best way to handle disposition of real property is to do a Trustee Deed and put your real property into a revocable living trust so you can control the distribution of your property and either specify who you would like to be able to live in the property or who you would like the proceeds to go to. However, if you choose not to have a trust, in Virginia you can also name a beneficiary for your real property and have it recorded with the county.
No Contest Clause
This is not a way to avoid probate, but rather a way to limit the time, expense, and headache of a probate proceeding. Your will can include a provision that removes the incentive for someone to initiate litigation to challenge the distribution of your assets specified in your will. If a beneficiary contests the will, they would then risk not receiving anything at all from your estate.
Generally, you can gift things such as jewelry, collectables, and art, as well as money, prior to death, without a detriment to yourself. Additionally, Virginia allows gifting up to $14,000 in assets annually to each beneficiary without any gift tax. This means, you’ve taken that property out of your estate, lowered the value of your estate, and eliminated the burden to your beneficiaries.