Updated: Aug 23
For most of our clients, they want to have a non-probate estate. There are lots of benefits to non-probate estates. Namely, probate can be long and expensive due to court intervention and non-probate estates avoid that by staying out of probate.
WHAT IS A NON-PROBATE ESTATE?
Non-probate estates are estates that can pass entirely to your beneficiaries without any formal probate action in the courts. Most of my clients that come in who want non-probate estates went through the probate process recently with a loved one and realized that even simple probates can be cumbersome and expensive. The most basic probate that I do with a will can still cost around $3,000 and will take 6-9 months to complete. A properly set up non-probate estate will cost maybe $1,000 in legal fees and advice, and might take 3-4 weeks just to draft and file any additional documents that might be needed.
The average person might have 6 kinds of assets that pass to their loved ones. A house, a car, a bank account, a retirement account like a 401k or IRA, a brokerage account, and life insurance. You can pass your bank account, IRA, 401K, or life insurance through something called a PAYABLE ON DEATH BENEFICIARY or TRANSFER ON DEATH BENEFICIARY. Meaning, you heir would supply a death certificate to the bank/insurance company, and they’ll just write a check to whoever is the beneficiary.
HOW DO I CREATE A NON-PROBATE ESTATE?
For the assets that do not transfer automatically, we will have to do something else. For example, you can execute a transfer on death deed for your house or transfer on death title for your car. Transfer on Death processes for your house and car are similar to the payable on death beneficiary, so once you pass all 6 assets to your heirs, there’s no real reason to do a probate unless there’s an asset that still needs to be passed. These examples could be something that doesn’t have a POD beneficiary like real estate, oil and gas interests, business interests, intellectual property interests, a bank account or life insurance policy with a blank beneficiary designation or even newer assets like NFT’s and crypto.
You can also achieve a non-probate estate using a properly structured and funded revocable trust. At Chiang Law Firm we regularly use a combination of trusts, Beneficiary designations and Transfer on Death deeds/titles to create a non-probate estate for our clients.
There are some shortcomings to this “easy“ form of probate. For example, if you name a minor as a beneficiary or someone who is disabled and is receiving Medicaid benefits as the outright beneficiary, you might have done more harm than good. For those estates we recommend using a system of transfer on death beneficiaries and trusts to make sure that those beneficiaries receive the benefit of their gifts, without causing future trouble for them. In addition, if you have heirs that should not have access to their money, such as those with substance abuse problems, or you want to do sophisticated tax planning you will need to reconsider this approach.
WHERE DO I START?
Call us so we can help guide you through this process! If you think you or someone you love has any questions about estate planning, give us a call at Chiang Law Firm at 713-568-9206, we would love to hear from you!