Before we answer the question, how do I avoid probate, we should really define what probate actually is. The actual process of going through probate will vary state by state and province by province. However, in general terms probate can be defined in the following way. It is a legal process that ensures that all of your debt is paid before distributing assets to your heirs. There is a probate fee associated with this process. It is based on the size of the estate. It can vary a great deal depending on the state that you live in.
Probate is all about winding up your financial affairs in a fair way. It is supposed to follow the instructions outlined in your will. If there is no will, the court will step in and distribute your assets. They pay debts first and distribute the remainder to your heirs based on local legal requirements.
If there are insufficient funds to cover your debts, the court will develop a formula again based on local laws that will see your assets distributed in a fair manner to pay all of your debts as much as possible. Some debtors will receive penny’s on the dollar.
Most lawyers would tell you that you should not avoid probate. The probate process ensures that everything is completed in a legal manner and funds or assets are distributed according to the instructions outline in the deceased’s will.
You can minimize the probate tax which is really the objective of most people. Assets that are jointly owned usually pass automatically to the surviving partner and do not become part of the probate process unless their share is specifically mentioned in the will.
For example, a home owned by two people is jointly shared and would pass automatically to the surviving spouse. You may still need to register a change to the deed to reflect a change in the ownership from joint ownership to single ownership.
Probate laws vary across the country. Check with your lawyer to plan your probate tax strategy and always make sure that you have a will.
For more ideas about avoiding taxes and especially probate taxes, click here.
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