Avoiding Probate
Avoiding probate
Probate is a legal process that takes place after someone passes away. It involves the informal or formal transfer of a deceased person’s assets to their heirs or beneficiaries through a court. Here in Arizona, this process is governed by the Arizona Probate Code. The probate process can be lengthy and costly.
Once a person is deceased, their heirs need to go through the probate process in order to transfer assets unless the deceased person took certain steps to avoid probate while still living.
Here are some strategies for avoiding probate for your assets.
1. Create a Living Trust: A living trust is a legal document that allows you to transfer ownership of your assets to a trustee, who will manage the assets on behalf of your beneficiaries. By doing so, your assets will not be subject to probate upon your death. Creating a living trust can be a complex process, so it is important to work with an experienced attorney to ensure that it is done correctly. Once a Living Trust is created, it is critical that the individual transfer assets into the trust. Any assets not transferred to the trust may still need to be addressed through informal or formal probate.
2. Joint Ownership: Another way to avoid probate is to hold property jointly with another person. When one owner dies, the property automatically passes to the surviving owner. This is known as joint tenancy with right of survivorship. It is important to note that joint ownership can have certain tax and legal implications, so it is important to consult with an attorney before making any decisions. Transferring assets to a person while the original owner is still living can also have tax consequences. Before you add a loved one to your deed, be sure to understand both the legal and tax consequences of doing so.
3. Beneficiary Designations: Many types of assets, such as life insurance policies, retirement accounts, and bank accounts, allow you to name a beneficiary. When you die, these assets will be transferred directly to your designated beneficiaries, without the need for probate. It is important to keep your beneficiary designations up to date, and to ensure that they are consistent with the rest of your estate plan. Beneficiary designations can be used to avoid probate for financial accounts, retirement assets, real property such as houses or condominiums, and cars. The process of designating a beneficiary is often specific to the type of asset. An attorney can help you ensure that you are using the right process to designate a beneficiary based on the type of asset. However, this process has limitations. If your intended beneficiary dies before you and there is successor beneficiary specified, your assets may still need to be transferred through probate. If your intended beneficiary is a minor, you should consult with an attorney for better strategies to leave the assets to the minor based on your goals.
4. Payable on Death Accounts: Another option is to use payable on death (POD) accounts. A POD account is a bank account that is set up so that upon your death, the funds in the account are transferred directly to your designated beneficiaries. This can be a simple way to avoid probate for your financial accounts.
5. Small Estate Affidavits: In some states, if your estate is below a certain threshold, you may be able to avoid probate altogether by using a small estate affidavit. This is a legal document that allows your heirs or beneficiaries to collect your assets without going through probate. The requirements for a small estate affidavit vary by state, so it is important to consult with an attorney to determine if this option is available to you. Here in Arizona, the current threshold for small estate personal property affidavits is $75,000. Small estate affidavits can also be used to transfer a decedent’s interest in real property so long as that interest has a total value, less liens and encumbrances, of not more than $100,000. In some circumstances, an attorney can assist you with filing a small estate affidavit for real or personal property under these thresholds.
In conclusion, there are several strategies that you can use to avoid probate for your assets. These include creating a living trust, joint ownership, beneficiary designations, payable on death accounts, and small estate affidavits. It is important to work with an experienced estate planning attorney to determine which strategies are right for you and to ensure that your estate plan is executed properly. By taking these steps, you can help ensure that your assets are distributed in accordance with your wishes, while avoiding the time and expense of probate.