A Probate Primer

Consider taking steps to avoid your estate from going into probate

By Deborah Jeanne Sergeant

In financial planning circles, “probate” sounds like a dirty word. Jeff Feldman, Ph.D., certified financial planner with Rochester Financial Services in Pittsford, is a little more pragmatic about it.

“Probate isn’t terrible, but it’s nice to avoid it,” he said. “I don’t think it’s terrible if your estate has to be probated, but if your beneficiaries want the assets sooner than later, a payable on death account is payable within weeks. If it’s probated, more like months.”

To avoid this scenario, Feldman suggested naming beneficiaries on all the accounts, a standard protocol for IRAs, but less common for other types. Instead of going through the probate process, the assets go directly to the beneficiaries named.

Feldman recommends consulting with an attorney to make the accounts payable on death to ensure they go directly to the beneficiaries. Any account without a beneficiary is typically subject to probate.

Feldman said that in some scenario, people making final plans may want to set up a trust, but consulting with an attorney is a good idea to ensure these special situations are handled properly.

“If it’s going into a trust like a special needs trust, it would avoid probate,” Feldman said.

Probate is a legal process that includes a judicial assessment of whether a will is valid, including administering the person’s estate. Whether someone has a will or not does not determine whether the estate must go through probate.

“That is a very, very common misconception,” said Phillip Provenzano, insurance agent and financial advisor with The Financial Guys Insurance Agency in Rochester. “Probate is very necessary in guaranteeing the orderly transfer of assets, but many people want to avoid it for various reasons.”

Avoiding probate helps you keep full control of assets without court interference, for example. It can also spare the family emotionally and provide for a second spouse and children for those who have remarried.

Provenzano said that some assets do not go to probate, as they have named beneficiary or joint ownership, such as life insurance, uniform transfer to minors accounts, US Savings Bonds payable upon death or with joint ownership, investment accounts designated as transfer on death; annuities; joint bank accounts; any accounts earmarked “payable on death” and “transfer on death” into a trust; an automobile with a value of up to $25,000 in value (one vehicle only); living trusts; jointly owned corporation stocks; LLC membership interests jointly owned; real estate held as joint tenants with rights of survivorship; tenants-by-the-entirety or life estate and lifetime gifts (with a power of attorney with a statutory gift rider), which “with the annual gift tax exclusion, you can give up to $15,000 to each recipient without tax consequences,” Provenzano said. “For a married couple, the total is $30,000 per recipient. Giving away assets that you expect to appreciate in value as the economy recovers makes use of your exemption while also shifting that appreciation in value to the next generation.”