One of the more common questions clients ask is "How can I avoid formal probate"?
There short answer is “it depends”. This is an important question that you should discuss in detail with your estate planning professionals.
Avoiding court-supervised probate can save money, time, and emotional energy. Generally, the type of the asset, as well as how it is owned, or titled, will determine whether an asset has to be transferred pursuant to formal probate procedures.
For example, life insurance death benefits can be transferred directly to the beneficiary designated in the policy. The usual practice is for the beneficiary to fill out a short application provided by the life insurance company and provide a certified copy of the death certificate to the Insurance Company. The death benefit is usually provided within a few weeks of receipt of the application. If bank accounts, 401(K) accounts and similar type accounts have a beneficiary listed, they can be usually be transferred in a similar manner.
In Iowa, real estate can be transferred to a surviving spouse if the property is held in joint tenancy with rights of survivorship by a relatively simple affidavit.
It is important to understand that if formal probate procedures are required, assets that pass pursuant to a beneficiary designation are still required to be listed on the Report and Inventory, and are usually considered as part of the gross estate of the decedent.
Consultation with your estate planning professionals and attention to detail are necessary to maximize any formal probate avoidance strategy. What may initially appear to be small distinctions or differences may have significant consequences if not properly documented or handled. Additionally, there may be other financial requirements related to a decedent’s death that have to be completed to be in compliance with applicable laws.
For more information, see our prior blog post title How to Title Property to Avoid Formal Probate.