WHY DO PEOPLE AVOID PROBATE?

Concern over the rising costs related to probate administration has led many people to take the legal steps necessary to ensure that there will be no need for probate administration upon their deaths. Avoiding probate may enable you to:

(1.) Reduce the legal and administrative costs associated with distributing your property;

(2.) Give you or your survivors certain tax advantages;

(3.) Make administration of your much Estate faster and easier for your loved ones; and,

(4.) Insure that your wishes are carried out by making them less susceptible to “challenge.”

A number of legal techniques for avoiding probate can be employed. But they all have one thing in common – the individual dies owning no property or assets titled in his or her name alone.

An experienced Estate Planning lawyer can help you decide if avoiding probate is the right course of action for you. Then he or she can draft the legal documents necessary to accomplish your goals.

WILL I SAVE MONEY BY AVOIDING PROBATE?

While an attorney will charge you “up front” to do your estate planning, it almost always saves you money in the long run. The initial cost of preparing a living trust, for example, usually does exceed the cost of preparing a will. This is a reflection of the additional time required in the preparation and implementation of a living trust. However, The money you invest in having your affairs in order, and avoiding probate, can save you (or your family) thousands of dollars in probate administration, legal fees and taxes, after you die.

DO I NEED A LAWYER TO AVOID PROBATE?

It is usually unwise and very difficult (if not impossible) to try to execute estate planning legal documents without an attorney, since the laws governing trusts, taxes, inheritance, property transfer, etc. are very complex and can and do change frequently. The advice and counsel of an experienced attorney is strongly recommended.

Unfortunately, one must also be very careful of certain disreputable individuals or so-called “businesses” that prey on the public (usually seniors) by offering certain Estate Planning or Financial Planning services. Many are NOT legitimate. Just because a company or organization calls themselves “elder law” or “financial planning” experts, it does not mean that they are qualified or legitimate.

If you are considering hiring any financial planning attorney, advisor, planner or investor, please investigate them thoroughly before paying any “fees” or trusting them with your assets. Here are a few ways you can “check out” the people with whom you are dealing:

(1.) All attorneys on this web site (www.lawyersinmichigan.com) have been screened for being in GOOD STANDING with the State Bar of Michigan. If you are using another lawyer (who has not been pre-screened by this sight) you can verify their “good standing” by calling the State Bar of Michigan at 1-800-968-1442.

(2.) All attorneys on this web site (www.lawyersinmichigan.com) have been screened and for having education, expertise and considerable experience in the areas of law for which they are listed. If you are using another lawyer (who has not been pre-screened by this sight) you can verify their level of experience by asking them what percentage of their practice is Estate Planning, how many Estates they have planned and administered, and if they have continued their education specifically in this area of law.

(3.) If you chose to use an Accountant or Financial Planner or Investment Advisor (i.e. a non-attorney) to help you do your Estate Planning, be very careful. Some organizations are very qualified, but many are less than competent, and some are actually dangerous scams! To “check out” non-lawyers you may call the Michigan Attorney General (517-373-1140) or the Michigan Bureau of Financial Services (877-999-6442).

WHAT ARE SOME OF THE WAYS PROBATE CAN BE AVOIDED?

Following are a few examples of the legal tools a lawyer may employ for you, to help you avoid probate. Remember, these are only examples and may or may not be right for your situation. You will need to consult with an Estate Planning lawyer or other professional to determine what is best for you.

Lifetime Gifts

This enables an individual to “transfer” property to others before their death, thereby avoid owning such property at the time of death. It is also known as an “inter vivos” gift. The income tax and gift tax effects of any significant gift should be considered carefully. And, once a gift once made may not be returnable.

Joint Tenancy / Tenancy by the Entirety

Property which is owned by two or more individuals as “joint tenants” ) passes directly to the surviving joint tenant upon the death of the other joint tenant. The most common example of this is having 2 (or more) names on the Deed to a house. (Remember it is the DEED, and NOT the mortgage that gives ownership). For example, if Father and Son own a house as “joint tenants,” then upon the death of Father (if Son is surviving), Son is the sole owner of the house., and the house need not pass through probate. (and vice versa).

Joint tenancy ownership is available for both real property (e.g. house, land) and personal property (e.g. stocks, bonds, bank accounts).

Property owned as husband and wife (“tenants by the entirety“) also provides rights of survivorship similar to joint tenancy (i.e. upon the death of the first spouse, the surviving spouse becomes the owner of the property).

Joint tenancy ownership is frequently used to avoid probate, however, it has some dangers and disadvantages. For example, if a woman transfers ownership of her house from herself as “sole owner” to herself and her adult-child as “joint tenant owners,” then the child’s approval is necessary for any future sale of the house. Also, if the adult-child who jointly owns the asset has creditors and/or a judgment against them , etc. the “jointly owned” property could be lost to the creditors. There may also be adverse tax consequences .

Some financial institutions and corporations limit the number of individuals who may own an account, shares of stock, or bond as joint tenants. This may present a problem for someone desiring to use joint tenancy to pass property to more than one individual at death.

Payable On Death Accounts

Some financial institutions have accounts which are paid to a named “beneficiary” (similar to how a life insurance policy works) when the owner dies. They may be called “payable on death” ( or POD), or “transfer on death” (TOD), or “trust or beneficiary” accounts. Securities such as stocks and bonds can also sometimes be titled in this form. This type of ownership avoids probate but does not have the risks of joint title because the beneficiary has no access to the account until the owner dies. You will have to check with your financial institutions to see if this form of ownership is available. as not all of them offer it.

Living Trust

In recent years the popularity using of living trusts to avoid probate has grown. A living trust is a trust created during the lifetime of the “grantor” (the creator of the trust). Typically, it is set up as a “revocable” trust, which means that the grantor (creator or “giver”) retains the right to revoke the trust or modify the terms of the trust at any time until he or she dies (or becomes legally incapacitated.)

After creating the “Living Trust“, the grantor "funds" the trust by transferring his or her property to the trust. In this way, the grantor can avoid actually owning any property in his or her name at death, and thereby avoid probate.

In very simple terms, the “Trust” now “owns” the property, and the Grantor (“giver”) becomes the “Trustee” (the person who controls the trust). So the Grantor still has full control of his or her assets but he or she technically isn’t the legal owner! Upon the Grantor’s death the Trust then distributes the assets according to the terms set up in the trust. Since the deceased didn’t legally own the assets, they do not have to pass through probate.

 There are also many other LEGAL methods that an attorney can implement for you, to insure that you avoid probate. He or she will discuss what methods may or may not be effective and appropriate in your particular situation. AND, an experienced lawyer will also help you carefully avoid “tricks” and “schemes” used by some to avoid probate that may NOT be legal, as well.