You hear it time and time again…you have probably even said it at some point in your life, “I want to avoid probate!” I find that few people understand exactly what that phrase means. And fewer understand the true impact of probate avoidance, or why they want to avoid probate.

As you learned in Series 1 of this installment, probate is the court process of administering someone’s probate estate at death – either under the direction of a decedent’s Will or the intestacy laws. Probate can be avoided or reduced through restructuring one’s assets. For example, naming beneficiaries on bank accounts, investment accounts, retirement accounts, stocks, and life insurance; adding a joint owner to an asset with rights of survivorship; or, creating a revocable living trust and transferring title of your house or other assets into the trust during your life. These are easy ways to restructure your assets from ‘probate’ assets to ‘non-probate’ assets. These ‘non-probate’ assets will pass immediately at your death to the beneficiary or joint owner outright, or to the then-serving trustee of your revocable trust to be distributed and administered in accordance with the terms of the trust.

I will admit it – I am a huge proponent of avoiding probate for most circumstances. In many situations, using beneficiary designations or creating a revocable trust is the easiest way to distribute assets at death, without getting the court involved in the administration. Probating an estate can be expensive, time-consuming, and frustrating. It requires court involvement and your assets and Will are made public. I think there are many compelling reasons to avoid probate. However, this is not a ‘one size fits all’ analysis.

For those without a revocable trust, probate avoidance is nearly impossible if you have assets like a house or a car – where there is no ability to designate a beneficiary. In addition, if you have minor children then you would absolutely not want to name a minor child as beneficiary on your investment account or life insurance policy (a greater discussion outside the scope of this series – but trust me!), since that minor child is unable to own property directly under the age of 18. If you do not have a revocable trust, and are relying on your Will to distribute your assets to your loved-ones in the percentages you desire, then you want a probate at your death to make sure that your intent is carried out.

Imagine you create a Will and decide you want to leave all of your assets to your four children, equally. Your oldest son asks you to add him as joint owner on all of your bank accounts, “To make things easier for you; to help pay the bills, cash checks, etc.” Little did you realize that adding your son as a joint owner overrides the terms you outlined in your Will. During your life, if your son files bankruptcy or has a credit claim against him or gets divorced, it will bring that account – your account – into your son’s litigation. When you die, those bank accounts become your son’s accounts – he owns them and can immediately access them. Your other children could sue their brother for their ‘rightful share’ but how much will litigation cost? What if your son spends the money before his siblings even realize it was there? Or maybe you did intend for those assets to pass directly to your son, but there was no evidence indicating this and you never had this discussion with your other children. It all gets very messy, very quickly.

Another issue is the payment of expenses and taxes. If you name direct beneficiaries or add someone as a joint owner, it is going to be very hard for your Personal Representative to get money back from that beneficiary to help pay taxes, funeral expenses, credit card debt, etc., after you die. Once someone gets an asset, they are very reluctant to give it up. It can put the estate at unnecessary risk of being insolvent and create an administration nightmare.

Before deciding if you want to avoid probate, or even should avoid probate, you need to be very clear on what you have (assets and debts), how you own your property, and how you want it to pass to your loved ones. In some situations, probate avoidance is ideal. In other situations, it can completely be counter to your goals and your existing estate plan. And when in doubt, contact me or your estate planning attorney to discuss your specific circumstances.

Maybe. Just because you do not have a Will, does not mean you are going to have probate assets at death. For example, if your assets are comprised of a bank account, investment account, retirement account, and stocks, you may have added beneficiary designations on each of these assets. As a reminder, probate property generally is individually owned with no beneficiary designation. Therefore, you can still avoid probate, even if you do not have a Will, by naming direct beneficiaries. If you have a car or real estate, where you cannot name a beneficiary, then yes, those assets would have to pass through probate at your death. Since there is no Will, the law will dictate where those assets go (to your heirs-at-law) and who can administer those assets. It is extremely important to have a Will. This will ensure that if you do have probate assets, the administration is as easy as possible, and your assets are going to the right person(s).

Maybe. If all marital assets are jointly owned by the spouses or have beneficiary designations, then usually there is no probate at the first spouse’s death. But, if any of the assets are individually owned, without a beneficiary designation, then there will be a probate at your death, even if your spouse is living. Keep in mind, how Massachusetts law distributes property at your death and to whom is often surprising! For example, if you are married, have no children, but have living parents, then your parents may be partial beneficiaries of your estate (M.G.L. c. 190B, s. 2-102). If this is not your intention, then you must have a Will to override this default under the law and ensure all assets pass to your spouse.