How can an estate plan prevent probate of my estate?

Just as with a Conservatorship, an estate plan uses several tools to prevent a court from gaining jurisdiction over your estate in the event of your death. The Durable Power of Attorney for Property enables your attorney-in-fact to handle your financial affairs and make last minute arrangements should your death be imminent. A common technique used by your attorney-in-fact, who is often your Successor Trustee as well, is to transfer property which is not currently held in your Trust into the Trust, so legal title to the property is held by the Trust at the time of your death. Both the Trust and Family Limited Partnership are legal entities which survive you after your death. Property held by a Trust or a Family Limited Partnership in legal title is held by that entity, and is thus not part of your estate at the time of your death. The instructions for the management of your property are set forth in these documents, and such property is managed by An estate plan uses several tools to prevent a court from gaining jurisdiction over your estate in the event of your death.

Both Trusts and a Family Limited Partnership are legal entities which survive you after your death. Property held by a Trust or a Family Limited Partnership is owned by that entity and not by you. Since you no longer own the property, it is not part of your estate at the time of your death. Only property you own at your death is subject to probate, so the assets owned by these entities would not have to go through that process. The instructions for the management of your property are set forth in the Trust and Partnership documents, and the Trust or Partnership assets are managed by Successor Trustees or other Partners in the event of your incapacity or death. In probate, the court oversees the transfer of assets from the deceased to others, but since the assets already belong to these entities there is no need to have the court involved, and the Trust or Partnership operates outside the court’s supervision. By getting a Trust or Family Limited Partnership in place and transferring ownership of particular properties to it, you avoid the need to get a court involved either with a Conservatorship in the event of your incapacity, or probate in the event of your death.

A Durable Power of Attorney for Property can help your representative deal with property that has not been transferred to a Trust. This document enables your attorney-in-fact to handle your financial affairs and make last minute arrangements should your death be imminent. A common technique used by your attorney-in-fact, who is often your Successor Trustee as well, is to transfer property that is not currently held in your Trust into the Trust, so legal title to the property is held by the Trust at the time of your death. This removes your property from your estate for purposes of probate and puts it in the control of your Successor Trustee.

Property can also pass outside of probate if it goes directly to a beneficiary on the death of the deceased. This is true for example of insurance policies, pension plans, and bonds that have a named beneficiary. It’s true of property that is jointly owned with a right of survivorship. On the death of one owner, the other owner(s) own that person’s interest automatically. Bank accounts can also be set up to pass directly to a beneficiary when the person who set up the account dies. These are sometimes called pay-on-death accounts or Totten Trusts.

A well coordinated estate plan can not only avoid probate but help you maintain a semblance of control over your property even after your death. Although you can’t take it with you, you can tell the deliveryman where to ship it (and how to avoid detours).

Case Studies: Preventing Probate With an Estate Plan

Case Study 1: The Trust Solution

John, a successful businessman, wanted to ensure a smooth transfer of his assets to his heirs while avoiding probate. He worked with an estate planning attorney to set up a revocable living trust. Over the years, John transferred ownership of his properties and other assets into the trust. Upon his death, the trust held legal title to these assets, bypassing the need for probate. The successor trustee, appointed by John, managed and distributed the trust assets according to John’s instructions, without court intervention.

Case Study 2: The Family Limited Partnership

Sarah and David, a married couple, had substantial wealth and wanted to protect their assets from probate. They established a Family Limited Partnership (FLP) as part of their comprehensive estate plan. They transferred ownership of their properties and investments to the FLP, making the partnership the legal owner. Upon their death, the assets held within the FLP passed directly to their designated beneficiaries without going through probate. The FLP allowed Sarah and David to maintain control over their assets during their lifetime and pass them on efficiently.

Case Study 3: Durable Power of Attorney for Property

Mary, an elderly individual, wanted to ensure her financial affairs would be managed smoothly if she became incapacitated or passed away. She executed a Durable Power of Attorney for Property, appointing her trusted attorney-in-fact. This legal document granted the attorney-in-fact the authority to handle Mary’s financial matters and make necessary arrangements in the event of her imminent death. The attorney-in-fact utilized the power of attorney to transfer properties not held in a trust to the trust before Mary’s passing, effectively excluding them from probate.

Case Study 4: Non-Probate Assets

Tom had various non-probate assets, including life insurance policies, pension plans, and jointly owned property with a right of survivorship. These assets bypassed probate and transferred directly to the named beneficiaries or surviving owners upon Tom’s death. By strategically arranging his assets, Tom ensured that they would pass smoothly and avoid the probate process.