By Lisa Hostetler Brown, Certified Elder Law Attorney, Upstate Elder Law-A Division of LawyerLisa, LLC.
With proper elder law planning, almost everyone can avoid the court process known as probate.
Probate is a court-supervised process that is required after the death of an individual who owns probate assets. A Will provides instructions for how probate assets should be distributed. If you are planning to use a Will at your death, that means your family will have to go to court. If a deceased person doesn’t have a Will, probate assets will still be distributed through the probate process, but state law (and the Judge!) will decide who receives those assets and who will be responsible for managing the estate.
The probate process generally takes a year or more to complete after death and requires the filing of a significant amount of paperwork with the Probate Court. This includes, but is not limited to, notifying state law beneficiaries (think next of kin), and filing the Will (if there is one), a probate application, an inventory of the deceased person’s assets, a general publication of notice to potential creditors, an accounting of estate transactions, and more. There will also be court fees which must be paid, and, depending on the circumstances, court hearings may be necessary to resolve various issues.
The probate process is only required when there are probate assets to be distributed. This means that non-probate assets do not go through the probate process. Skilled elder law attorneys design a plan for their clients that completely avoids probate court. By creating a plan that utilizes various techniques and strategies, assets can pass much easier and more efficiently. Trusts can be used to move and protect assets. An irrevocable trust may be used to avoid probate, maintain legal residency tax discounts, and protect a home from Medicaid estate recovery.
In the majority of cases, it is better to move assets into a trust than to add a family member directly to an asset. While adding a family member may avoid probate (if the asset has the proper survivorship titling), it can cause unintended consequences.
One issue that arises is that when you add someone to your asset, they now have a current, lifetime interest in it. If you add a family member to your home, they can prevent you from selling it or mortgaging it. If it is sold, they are entitled by law to their share of the proceeds. This can cause disastrous consequences for some families.
Adding family members to assets during lifetime can also trigger gift tax concerns and can be considered gifts for Medicaid purposes. Again, this has had disastrous effects for many families .There is also the potential for a recently added family member’s personal problems to affect the asset. If the family member has creditors or goes through a divorce, the asset could be implicated. A trust can be utilized to maximize benefits and minimize the potential issues.
Trusts allow Settlors (the persons who create the trust) to create ongoing rules, requirements, and stipulations which will dictate a beneficiary’s access to trust assets. While the probate process ultimately results in a final outright distribution of assets to the intended recipient under the Will, trusts can exist for many years and can set forth numerous rules and requirements that the Trustee follows during the term of the trust.
The possibilities are practically endless, so Settlors are able to customize their trusts in ways that align with their values and will be most beneficial for each beneficiary. For example, a Settlor may decide to hold funds in trust for a child who is too young to be responsible with a large sum of money, or the Settlor may opt for a longer trust term to protect assets from the spouse of a beneficiary in case of divorce.
A comprehensive elder law plan that includes a thoughtful combination of trusts and asset titling can avoid the hassle and risks of probate. If you are interested in avoiding probate for the ones you love, reach out to a qualified elder law attorney for a consultation. Don’t leave your family in a bind, plan ahead now!
The information contained in this article is for general educational purposes only and should not be relied upon without a specific review of your particular situation. It is not legal advice. If you would like legal advice on this topic, please schedule a consultation with our office by calling 864.990.0347 or emailing info@LawyerLisa.com. L
isa Hostetler Brown is a Certified Elder Law Attorney certified by the National Elder Law Foundation Main office: 7511 Saint Andrews Rd, Ste 3, Irmo, SC 29063. Upstate office: 133 Woodruff Place Cir, Simpsonville, SC 29681.