Protecting Your Assets: How to Avoid Probate
Estate planning is all about securing your assets and ensuring they go to the loved ones you intend, without unnecessary delays or expenses. One of the most critical steps in achieving this is avoiding probate.
Probate is a time-consuming, costly, and public legal process that can complicate the transfer of your assets after your passing. Fortunately, with the right planning, you can sidestep probate and ensure a smooth and private estate transition. In this post, we’ll break down what probate is, why you may want to avoid it, and the most effective strategies to keep your assets out of court.
What is Probate?
Probate is the legal process that must be done to transfer the title of assets after someone passes away. It involves:
Validating the Will – If there is a will, the court determines if it is legally valid.
Paying Debts and Taxes – The court looks into the deceased’s outstanding financial obligations and oversees their payment.
Distributing Assets to Heirs – After the debts and taxes are paid, the court oversees the transfer of the remaining assets to the beneficiaries based on the will or, if there is no will, according to state intestacy laws.
While probate serves a legal purpose, it comes with several drawbacks that many people want to avoid.
Why Avoid Probate?
Probate can create significant challenges to the heirs or beneficiaries, including:
Delays – It can take months, in some cases, even years, before probate can be granted. Thus, beneficiaries will have to wait a significant time before they can receive their inheritance.
Expenses – Probate is not free. To pay for the court fees, legal expenses, and other administrative costs, the executor will need to access and reduce the deceased person’s assets.
Privacy Issues – Probate is a public process. A deceased person’s private affairs, including those of any involved family member or friend, will be subject to scrutiny. Furthermore, the details of this private information will become part of the public record, which anyone can access.
Dispute Risks – During probate, anyone can challenge the legality of a will or estate decisions. Thus, individuals like family members or creditors may issue disputes, which can further delay asset distribution.
Best Strategies to Protect Your Assets from Probate
Fortunately, you can take proactive steps to keep your estate out of probate and prevent the issues that come with it. The steps outlined below will provide you with a sense of control and flexibility over your assets.
1. Creating a Revocable Living Trust
A revocable living trust is a tool that allows you to place your assets in a trust. During your lifetime, you maintain control of these assets. Upon your passing, your designated trustee can distribute assets directly to beneficiaries without probate. Creating this trust:
Keeps your estate private
Allows for faster asset distribution
Provides flexibility as assets can be added or removed at any time
2. Designating Beneficiaries on Financial Accounts
Financial accounts include bank accounts, life insurance policies, and retirement plans. These institutions offer accounts such as:
Payable-on-Death (POD) Accounts – Bank accounts that automatically transfer to a named beneficiary.
Transfer-on-Death (TOD) Accounts – Investment and brokerage accounts that bypass probate.
You can designate your beneficiaries in these accounts. By doing so, you can ensure that the funds from these assets pass directly to your loved ones without court involvement. Alternatively, you can include these accounts in your trust.
3. Jointly Owning Property with Rights of Survivorship
You can jointly hold a property with another person, and through the right of survivorship, you allow the ownership of that property to automatically transfer to your co-owner upon your passing. The most common forms of joint ownership are:
Joint Tenancy – Both owners have equal ownership, and the surviving owner automatically inherits the property.
Tenancy by the Entirety – A type of joint ownership for married couples that protects against certain creditors.
4. Using a Transfer-on-Death Deed
This estate planning strategy only applies to real estate assets and may not be available in some states. Fortunately, Arizona is one of the states that allow this deed. Through a transfer-on-death (TOD) deed, you can pass real estate directly to a beneficiary without probate. When you create this deed, you remain the sole owner of the property during your lifetime. Upon your passing, the property is transferred to the designated beneficiary without court involvement.
5. Making Lifetime Gifts
A simple way to reduce probate exposure is to gift assets while you’re still living. When you make lifetime gifts following the IRS annual exclusion limits, you won’t have to pay gift taxes. For example, in 2025, you are excluded from paying gift taxes if you give a lifetime gift of $19,000 or below per receiver. Through lifetime gifts such as this, you reduce the size of your estate and minimize estate taxes while ensuring your loved ones receive assets without probate.
How to Avoid Court Involvement Before Probate: Set Up a Durable Power of Attorney
Through a durable power of attorney (POA), you can assign someone you trust to manage your financial affairs if you become incapacitated. While a POA does not directly help avoid probate after your passing, it plays a crucial role in preventing financial disruptions and reducing the need for court intervention during your lifetime. With a POA in place, your beneficiaries won’t have to go through a costly and time-consuming court process to be appointed as your guardian or conservator to manage your affairs.
Plan to Avoid Probate with the Help of Rilus Law
Today is the best time to start avoiding probate. With proactive planning and properly placed strategies, you can protect your loved ones from the delays, expenses, and stress of probate. With probate experts like the Rilus Law team on your side, you can start planning now and create a comprehensive estate plan to avoid probate. Schedule a free consultation and secure your legacy today!