Should Avoiding Probate Be Your Primary Estate Planning Goal?
“Does it avoid probate?” That is an important question to ask when evaluating ideas for how to leave assets to your beneficiaries. However, does avoiding probate automatically make it the best idea for your family? Is it necessary for every asset to avoid the probate process? Are there any advantages to having some assets go through probate?
Probate is the court supervised process by which assets owned by the person who died that don’t already have instructions for how to transfer to a new owner, transfer to a new owner. In general, probate is necessary for assets 1) that are not owned in a trust or 2) that don’t have a named beneficiary (like life insurance) or 3) that don’t have a joint owner who has rights of survivorship.
Every option for avoiding probate (trusts, beneficiary designations and joint owners with rights of survivorship) has its own set of pros and cons. Many times, someone will look at the perceived pro of avoiding probate without thinking about the possible con. For example, if while you are alive, your joint owner gets sued, the joint asset may become part of the lawsuit.
When someone dies, creditors usually have up to two years to make a claim for money they think is owed to them by the person who died. This means that when a trust (which avoids probate) distributes an asset to a beneficiary, the beneficiary has to be prepared to possibly return the asset if a creditor files a valid claim within two years of the decedent’s death.
In Florida, if any asset goes through the probate process, the period for creditors to file a claim can be reduced down to 90 days from two years. Even the other assets that are passing to beneficiaries through a trust can benefit from the reduced creditor time period that sending this one item through the probate process creates.
So, when evaluating ideas for how to leave assets to your beneficiaries “does it avoid probate?” is an important question but it shouldn’t be THE question. The most important question is “does this option carry out my wishes and best protect my family?” Only a careful evaluation of the pros and cons of the ways to avoid probate, as well as the pros and cons of including probate in your estate plan can give you the custom crafted estate plan that is right for you and your family.