In many cases, the process of probate will be necessary when an estate is being administered. We practice law in New York, and in our state, probate matters are handled by the Surrogate’s Court. The executor or personal representative would complete the necessary hands-on tasks if there is a will, or if the decedent died intestate. The court would provide supervision during the process.
The above being stated, under some circumstances, probate would not be necessary. Plus, some people proactively implement probate avoidance strategies for various reasons. We will look at the details here so that you can gain a basic understanding of the framework.
Simplified Probate Procedure
States have their own respective probate codes that they follow, with the exception of the 16 states that have adopted the Uniform Probate Code. New York is not part of this group. In our state, there is a simplified probate process that can be available for small states. If the value of the property involved is $30,000 or less excluding real estate, this process can be utilized.
Life Insurance Proceeds
If you have life insurance, as long as you pass away under circumstances that are covered in the policy, the company will pay the beneficiary or beneficiaries directly. This transfer would not be subject to the probate process, and for your information, life insurance proceeds are not looked upon as taxable income.
Payable on Death Accounts
Banks and brokerages typically offer payable on death or transfer on death accounts. An account like this will often be referred to as a “Totten trust.” When you open one of these accounts, you name a beneficiary. While you are alive, the beneficiary would not have access to funds in the account. You would retain exclusive control.
After your passing, the beneficiary would obtain a death certificate and present it to the financial institution. If everything is in order, the beneficiary would become the owner of the account, and the probate process would not be a factor.
Property Held in Joint Tenancy
It is possible to add a co-owner to the title or deed of your real property. The person that you add would become a joint tenant, and joint tenancy comes with right of survivorship. If you predecease the other joint tenant, he or she would assume sole ownership of the property, and the Surrogate’s Court would not be involved.
Revocable Living Trusts
A revocable living trust is a versatile estate planning tool that can be a better choice than a last will. While you are living, you can act as the trustee and the beneficiary of this type of trust. In the trust agreement, you name a successor trustee and a successor beneficiary.
After your passing, the trustee would be empowered to distribute assets in the trust to the beneficiary in accordance with your wishes. These distributions would take place outside of probate.
There are some drawbacks that go along with probate, and this is one of the reasons why people try to avoid the process through the utilization of living trusts. Expenses accumulate during probate, and it can take eight months to year to run its course. Inheritances cannot be distributed until the estate has been probate and closed by the court.
Another major benefit that is gained when you have a revocable living trust is the ability to allow for measured distributions over a period of time. For example, let’s say that you have income producing property in the living trust. You could instruct the trustee to distribute the earnings from the trust to the beneficiary while the principal remains intact for a prescribed period of time.
Learn More About Estate Planning!
We have provided some useful but limited information in this relatively brief blog post. If you would like to take your knowledge to another level, we are offering some great opportunities in the near future.
Our estate planning attorneys are holding a series of seminars, and you can learn a lot if you attend one of these information sessions. There is no admission charge, and you don’t have to make any obligations, but we do ask that you register in advance, because space is limited. To get all the details, visit the seminar page on this website.
Mark S. Eghrari, Estate Planning Attorney
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