Probate & Estate Planning: A Must-Know Connection

Understanding the connection between probate and estate planning will help ensure your financial legacy is secure, and your assets are distributed according to your wishes after death. Here, we explain the probate and estate planning process in detail and how to avoid it through joint ownership of property, pay-on-death accounts, and other methods.

Understanding Probate and Estate Planning

Estate planning on your own can be overwhelming, but we’re here to help make the process far less complicated and ensure you have a legally sound plan and avoid the pitfalls of DIY wills. Give us a call at (828) 258-2888 for an initial case evaluation. We even offer free estate planning seminars to help people of the Asheville community and surrounding areas learn how they can secure their financial legacy and ensure their loved ones will be cared for.

What is Probate?

Probate is the legal process after someone’s death intended to validate their will and ensure their estate is administered according to their wishes. The probate process involves identifying the assets, paying any outstanding debts, taxes, and expenses, and distributing the remaining assets to the beneficiaries per the will. 

Probate is overseen by a court, typically involving an appointed executor, personal representative, or entity chosen by the deceased to manage the estate. When there is no will (intestate), or the will is deemed invalid, the probate court appoints an administrator to handle the estate following the state’s intestacy laws. Your family may be left high and dry, and your assets can easily end up in the wrong people’s hands without proper probate and estate planning.  

What is Estate Planning?

Estate planning allows you to strategize and organize your assets to limit uncertainties during probate. The primary goal of estate planning is to ensure that your assets are preserved, managed, and properly distributed on your terms after death. 

An estate plan typically includes components such as a will, living will, power of attorney, trusts, and beneficiary designations. Comprehensive probate and estate planning can minimize the chances of family disputes and reduce taxes and other expenses associated with transferring assets and property to the heirs.

Probate and estate planning can be complex and not a project you should DIY; seek legal advice from a professional estate attorney who can tailor your estate plan to maximize asset protection and ensure your wishes are carried out to the letter.

Importance of Probate and Estate Planning

Probate and estate planning ensures that your assets are administered according to your will (or by state law if there is no will). Probate also prevents fraud and provides legal recourse for settling disputes or objections about your estate.

Estate planning is essential in minimizing family disputes, preserving wealth, and meeting your expectations. A well-developed estate plan helps protect assets from greedy creditors, reduce tax liabilities, and ensure that your surviving loved ones are taken care of.

Difference between Probate and Estate Planning

Probate and estate planning serve different but complementary roles in managing your assets; the key distinction between probate and estate planning is the timing and objective of each process:

• Probate occurs after your death, while estate planning is a proactive process that takes place during your lifetime.
• Probate is a court-supervised legal procedure, whereas estate planning primarily involves consultations with professionals, such as attorneys and financial advisors, to develop strategies that suit your needs and unique circumstances.

Probate and Estate Planning: Probate Executor Responsibilities

The duties and responsibilities of the executor are numerous and include:

• Opening the probate case with the proper court
• Locating, gathering, and securing the assets
• Notifying the decedent’s creditors and beneficiaries
• Managing financial affairs, such as filing taxes, paying bills, and overseeing bank accounts.
• Ensuring debts, taxes, and other expenses are paid from the estate
• Preparing documents and reports for the court and beneficiaries
• Distributing the remaining assets to the heirs and beneficiaries according to the terms of the will or state inheritance laws.

Inventorying and Appraisal of Property

The executor is responsible for gathering all types of assets, including real estate, personal possessions, bank accounts, stocks, bonds, and other investments specified during the probate and estate planning process. The inventory should list each asset and its estimated fair market value at the time of the decedent’s death—a professional appraiser may be needed to value specific assets, such as real estate or collections of valuable items. The inventory is then filed with the court.

Payment of Debts and Taxes

One of the executor’s primary responsibilities is to ensure that the debts, taxes, and other expenses are paid from the estate’s assets. This can include funeral/memorial service expenses, outstanding loans, medical bills, and any owed income or estate taxes.

The executor also notifies creditors of the decedent’s death to settle any valid claims before the assets can be divvied up as specified in the will. If the estate does not have sufficient assets to satisfy all creditor claims, the executor must follow state laws to determine the appropriate order of priority for payment.

Distribution of Assets to Heirs and Beneficiaries

Once the executor has inventoried and appraised the property, settled debts and taxes, and filed any necessary accounting and reports with the court, they can distribute the remaining assets to the heirs and beneficiaries. 

In some cases, assets may need to be liquidated to pay off debts or taxes or to provide cash distributions to beneficiaries; the executor ensures that this liquidation and distribution process is orderly and transparent.

Probate and Estate Planning: Avoiding Probate

The probate process can be time-consuming and expensive; avoiding probate or minimizing its effects is typically a primary goal in probate and estate planning.

Reasons to Avoid Probate

There are several reasons why avoiding the probate process is high on the estate planning priority list:

• Privacy. Probate is a public process. The information regarding your estate, including the value and distribution of assets, will become public record.
• Cost. Probate can be an expensive affair, with fees for executors or administrators, attorneys, and other professionals adding up. These costs can eat into the assets that are intended for your beneficiaries.
• Time. The probate process can be a lengthy one—many cases can take more than a year to complete. This delay means your loved ones may not have the means for immediate expenses, such as funeral costs or outstanding debt.
• Contesting. Probate is open to challenges by potential beneficiaries who feel they have not been treated fairly or question the will’s validity. A lengthy contest may dwindle estate assets and hold up asset distribution even further.

Joint Ownership of Property

Probate and estate planning may use joint ownership of property to avoid probate. In cases where property is held jointly (real estate, bank accounts, investment accounts, etc.), the surviving joint owner will automatically inherit the deceased’s share and bypass the probate process. This right of survivorship can be achieved through joint tenancy with right of survivorship or by designating the account as “Tenants by the Entirety” (for a spouse). 

Joint ownership can create potential issues like gift taxes or unintended beneficiaries. You’ll need an expert estate planner to help you weigh the benefits against the potential pitfalls during the probate and estate planning process.

Pay-On-Death Accounts and Transfer-On-Death Deeds

Another way a probate and estate planning attorney can help you avoid probate is to establish pay-on-death (POD) accounts or transfer-on-death (TOD) deeds for financial accounts and real estate.

A POD account designates a beneficiary who will automatically inherit the account’s assets upon the account holder’s death—no probate process required. 

A TOD deed names a beneficiary who will inherit real estate property upon the owner’s death, again bypassing the probate process. 

POD and TOD designations should be reviewed and updated to reflect your current wishes, and you’ll need to consider any gift tax implications—this is why you need an experienced estate attorney in your corner for solid probate and estate planning strategies. 

Revocable Living Trusts

A revocable living trust holds some or all of your assets during your lifetime and is managed by a trustee (a person or entity you get to appoint). When you pass away, the trustee distributes the assets to your named beneficiaries, effectively skirting the probate process. The trust can be changed or revoked during your lifetime, and you can even appoint yourself as the trustee for continued control over your assets. Creating a living trust may have higher upfront costs than a simple will, but strategic use of estate planning strategies to avoid probate can easily make up for this expense.

Gifting Assets Before Death

Another probate and estate planning strategy to avoid probate is to give away assets as gifts before death. Gifted assets will not be part of your estate and will not be subject to probate. Your estate planning lawyer will explain gift tax implications and any potential impact on your overall estate plan if this is a strategy you’d like to use. 

Take Control of Your Financial Future With A Customized Estate Plan

Learn more about probate and estate planning at our free estate planning seminars. When you’re ready to secure your estate and ensure your loved ones are taken care of when you’re gone, Craig Associates, PC is here for you. Call our office at (828) 258-2888 to meet with experienced estate planning attorney Chris Craig, and read our reviews to see how we can provide peace of mind for you and your family.