Reasons to Avoid Probate Administration

Avoiding Probate May Reduce Costs and Eliminate Conflicts

Aug 5, 2009

Estate planning to avoid probate can save time and money. It may also enhance control over one's property and simplify matters upon one's death.

Estate planning to avoid probate involves making sure one's property is not subject to estate administration under the terms of a will, or to the laws of intestate succession in the absence of a will. Many people prefer to convert most or all of their property to nonprobate property in order to avoid probate administration. There are a number of solid reasons for this.

Avoiding Probate Allows Immediate Distribution of Assets

Certain nonprobate assets are available for distribution immediately upon the decedent's death. These assets pass by operation of law to the decedent's beneficiaries without going through estate administration. Several estate planning devices are available that allow immediate distribution. These include:

Avoiding Probate may Reduce the Costs of Administration

Probate costs are tied to the monetary value of the estate. When costs must be paid out of the estate, this reduces the amount left over for distribution. For example, some states impose a probate tax based on the value of the assets in the probate estate. The larger the probate estate, the higher will be the probate tax. It is imposed only on the probate estate and is levied by the state annually until the estate is closed.

Other costs tied to the size and complexity of the estate include attorneys' and accountants' fees, the fees of the personal representative or administrator, and the cost of a surety bond if one is required. Accordingly, converting as much property as possible to nonprobate property lowers the cost involved in administering the estate.

Nonprobate Property is not Subject to Creditors' Claims

Only property that is part of one's estate at death is subject to the claims of one's creditors. Real and personal property owned individually or as tenants in common with another, for instance, would remain part of the probate estate and would be subject to the claims of the decedent's creditors. Converting such property to nonprobate property would remove it from the estate, and from the reach of creditors.

Nonprobate Property is not Subject to the Claims of a Spouse

All U.S. states have provisions that protect surviving spouses from disinheritance. Most states offer a spouse the choice of either accepting the provisions in the decedent's will or renouncing the will and electing the percentage or share of the decedent's estate allowed by law (e.g., 30% of the estate). This is called an elective share or a forced share. Since nonprobate property is not part of the estate, it is not available for elective or forced share.

Avoiding Probate may Avert Multi-Jurisdictional Conflicts

When a decedent has maintained residences in more than one state, conflicts may arise in trying to determine the decedent's domicile for estate administration purposes. Each state may assert domicile and seek to claim jurisdiction over the decedent's intangible property. Resolving a multi-jurisdictional conflict over domicile would add court costs and legal fees and prolong administration. Avoiding probate may avert the possibility of a multi-jurisdictional conflict.

Avoiding Probate Could Prevent a Will Contest

Converting property to nonprobate assets may forestall the types of conflicts that arise when a last will and testament is the subject of a will contest lawsuit. Wills may be challenged on several grounds; however, in the absence of a showing of fraud or undue influence, most inter vivos transfers of property are difficult to negate.

Tax Considerations and Seeking Expert Advice

It is important to remember that nonprobate property remains part of the decedent's gross estate for federal and state estate tax purposes. Accordingly, one should keep careful records of each item of property for the preparation of tax returns. Additionally, one should seek the advice and counsel of an estate planning attorney, a tax expert or other professional before attempting to make any changes to one's estate.

Brown, Gordon. Administration of Wills, Trusts, and Estates (3d ed.). N.Y.: Delmar Learning, 2003.

Disclaimer: This article is in no way intended as legal or financial advice. For help with specific legal or financial issues, one should contact a licensed attorney or accountant in one's own jurisdiction.

The copyright of the article Reasons to Avoid Probate Administration in Law is owned by Suzanne Bechard. Permission to republish Reasons to Avoid Probate Administration in print or online must be granted by the author in writing.