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How to Avoid Formal Probate

One of the more common questions clients ask is "How can I avoid formal probate?" Avoiding court-supervised probate can save money, time, and emotional energy, so it's understandable why so many clients want to know their probate avoidance options.

The short answer is “it depends.” 

Estates of decedents with assets under $25,000.00 may have these assets distributed by Affidavit after the appropriate waiting period. However, there are other ways to ensure certain assets can avoid probate.

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. This is an important question that you should discuss in detail with your estate planning professionals.

How Different Assets Can Avoid Probate

Life Insurance Benefits

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.

Real Estate

Real estate titled in joint tenancy with rights of survivorship passes to the survivor by law. In Iowa, a one-page affidavit can be used. If the real estate is in an LLC, the Operating Agreement can provide for the transfer upon the owner's death.

Vehicles

Titling your vehicle can be the simple difference that allows your vehicle to avoid probate. It is recommend to have the vehicle titled under each spouse's name (example: Husband or Wife, as opposed to Husband and Wife).

Bank Accounts

Like vehicles, you can title your bank account under each individual spouse's name. Alternatively, you can have the accounts set up with a designated beneficiary and confirm with the bank in writing that no formal probate proceedings will be required to make that transfer.

Investment Accounts

In addition to using the titling methods of vehicles and bank accounts, investment accounts can be established as Pay on Death (POD). In that instance, the account is liquidated and the proceeds given to the named beneficiary. There is also an option of Transfer on Death (TOD). In that instance, the account itself with the particular investments are given to the named beneficiary. 

Corporate or LLC Interests

These can be transferred pursuant to the By-Laws or Operating Agreement. Technically the transfer is the shares or membership units because the entity itself owns the asset.

Reach out to Howes Law Firm, P.C. for Help With Mitigating Probate

Keep in mind that there are notification requirements to the Department of Human Services. While you may avoid court-supervised probate, it is a good business practice to consult with legal counsel to make sure that these notification requirements are followed.

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.

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