How to Avoid Unnecessary Probate Costs?
Probate is the legal procedure through which property ownership (or part of it) of a person who has died is transferred to their heirs.
All real estate, joint bank accounts, and some stocks, bonds, and other investments held in your name alone will need probate. Jointly-owned property with the right of survivorship, or property with a payable-on-death beneficiary designation avoids the probate process. However, if you get into any such process, the probate fee calculator efficiently assesses the probate cost.
There are two types of probate documents that will need to be prepared after someone dies:
1) An application for Letters Testamentary (a document appointing an executor), and
2) An inventory of all assets, liabilities, and expenses must be submitted to the court for approval before payment can be made.
The following steps will help you to avoid probate cost:
Consider a valid will
To avoid future contention among your heirs, you should prepare a will if you are married or own property. If you are single or are married with no children, it is advisable to make a holographic will (a handwritten one) with witnesses.
Suppose there are any questions about your mental competency when the will is signed. In that case, this will avoid the need for a court-appointed guardian to oversee the issuance of letters testamentary.
Make sure your assets are appropriately titled.
All real estate, stocks, and other investments should be in your name alone, with the right of survivorship if possible. It means that when you die, there will be none of this type of property in your estate that needs to be probated.
If the bulk of your net worth is in a bank account, brokerage account, or retirement fund, make sure they are titled as “pay on death” or “in trust for” the named beneficiary. Assets that only have a payable-on-death designation can also avoid probate after you die as long as there is no will.
Be aware of joint tenancy issues.
A co-mingled account is an asset that has two or more owners, with each person’s contributions treated as an undivided interest in the entire balance of the account. This type of asset can be simple to maintain if all co-owners have equal interests in the whole asset at all times.
However, suppose a co-owner withdraws from the account with no intention of returning money to it. In that case, the owner may inadvertently terminate the right of survivorship in that portion of the assets and create a tenancy in common for that person’s share.
Tenancy in common is not as desirable as joint tenancy with the right of survivorship. In a tenancy in common, the co-owners share of the asset is exposed to estate taxes and creditors.
To avoid probate costs, make sure that when you buy any real property or deposit money into a bank or brokerage account owned by someone else, all parties sign a written agreement stating what will happen to the property if one of the owners dies.
If you already own real estate or investments with another person, it’s a good idea to make sure new deeds and account titles are appropriately drafted to avoid future problems.
Consider “payable on death” bank accounts, brokerage accounts, and UGMA/UTMA custodial accounts.
Put your bank accounts, brokerage account, and UGMA/UTMA custodial accounts in the name of the beneficiary. On the death of one owner, that person’s interest immediately vests in the beneficiary; there is no probate required for this type of designation.
However, if your child were under age 18 when you opened a UGMA/UTMA custodial account, you would have to appoint a custodian for the child’s share of the funds during the child’s minority.