A lot of people have heard that probate is something to avoid when you are planning your estate, because it is a hassle for the rightful heirs.
There are a lot of expenses that accumulate during probate, and it is time-consuming. Inheritors usually do not receive their inheritances while an estate is being probated by the court, and it will take eight months to 18 months in most jurisdictions. Complicated cases can be stalled in probate for longer periods of time.
Another drawback that goes along with the process is the loss of privacy. Probate records are available to the general public, so anyone can access them to find out how you distributed your resources. This can potentially cause problems among people that were close to you.
Some types of asset transfers are not subject to probate. When you hear about them, you may proactively decide that you will use one or more of these methods. In this post, we will look at some of the potential pitfalls, and they are considerable.
POD Accounts and Verbal Instructions
When you open an account at a bank or a brokerage, you have the option of adding a beneficiary. This is called a payable on death or transfer on death account. If you have one of these accounts, your beneficiary will not have access to the funds while you are still alive.
After your death, the beneficiary would obtain a copy of the death certificate. It would be presented to the institution, and the funds would be released to the beneficiary. The transfer would not be subject to the probate process.
All of this sounds simple on the surface. There are those that will name a single beneficiary and give this person verbal instructions. They tell the beneficiary how they want the assets to be distributed. This is well and good, but there is nothing to legally compel the beneficiary to follow these directions.
The beneficiary could decide that you were wrong about the way you decided to spread around the assets. Or the beneficiary can be negatively influenced by someone who disagrees with your wishes. There is also the potential for greed to enter the picture, and you never know how someone will act under these circumstances.
When you consider the possible negative outcomes, you can see that this is not a very good estate planning solution.
Joint Tenancy With Right of Survivorship
Another way to transfer property outside of probate would be to add another owner to the title or deed of your home or some other type of property. This is called the condition of joint tenancy, and it comes with right of survivorship.
If you go this route, the other joint tenant would assume sole ownership of the home after your death. The probate court would not be involved in the transfer, and that’s the good news.
The bad news is that the joint tenant would own half of the property right away, even while you are still living. As a result, you would have to get the cooperation of the joint tenant if you decide that you want to sell or refinance the property for some reason.
Plus, guess what would happen if the joint tenant was the subject of a lawsuit or some type of lien? Since the joint tenant would own half of the property, that portion would be available to litigants seeking redress. This dynamic would also enter the picture if the joint tenant was to go through a divorce.
Attend a Free Webinar!
We have been conducting webinars to share key information about estate planning. The sessions are offered free of charge, and they couldn’t be any more convenient, so this is a great way to invest a little bit of spare time.
You can see the dates if you visit our webinar page, and when you identify the session you would like to attend, follow the simple instructions to register.
Plan Your Estate the Right Way!
There are better ways to avoid probate and transfer ownership of your property safely and efficiently. If you would like to explore your options, we are here to help.
You can schedule a consultation right now if you give us a call at 630-568-8611. There is also a contact form on this website you can use if you would prefer to send us a message electronically.
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