There are many options available for avoiding probate. Some of the more common options are a living trust, co-ownership of property, and beneficiary designations.
There are a lot of different types of living trusts available. Which trust should be selected depends on what the family situation is, whether or not there might be a family member with special needs, and the nature and extent of the assets involved. Basically, a trust establishes a document and puts a system in place where the trust survives the death of the person who establishes the trust (called the “Settlor or Grantor”). There is no need for probate when the Settlor dies unless they left other assets outside of the trust.
Another common method for avoiding probate is co-ownership of property. We see this a lot when there is an older couple with a small estate who own their home and they don’t want that to go through probate but they don’t want to spend the money on a more complex estate plan just to handle their home. What they will do is they will have a deed drafted, which adds their children in title to the property such that, when they die, the children will own it by virtue of their co-ownership or their tenancy in common with the parents and then they won’t have to probate the house at all. Although co-ownership of real estate or other assets) is a very common method, care should be taken as there can be other lifetime and tax ramifications to this method.
Beneficiary designations will also work with a lot of different assets. Most commonly, life insurance is a good example of one of those types of assets. IRAs, 401(k)s, and any kind of tax deferred investment can also have a beneficiary designated, but the relationship of the beneficiary can be very important when it comes to the tax consequences. In addition, inheritance of the tax-deferred plan by minors can create other concerns.
Even some bank accounts can have beneficiary designations. Depending on the bank and their policies, a lot of common checking and savings accounts allow you to name a beneficiary in what they call a “payable on death” or “transfer on death” designation such that the account will pass to someone on the death of the owner, similar to a life insurance beneficiary. The client can use that account the way they want to during their lifetime, but when they die, all their beneficiary has to do is take the death certificate to the bank and the bank is going to turn the account over to the named beneficiary.
There are more complex and specialized methods of avoiding probate, like ladybird deeds or other kinds of transfers that don’t take effect until death, which are still done during the lifetime of the grantors but don’t take effect until the death of the grantors.
The probate process in Michigan is what I call “form-based” and the Michigan Supreme Court Administrator’s Office approves and publishes these forms. In theory, a person could obtain the forms and fill in and file them with the court on their own, which makes it sound easy. Occasionally a person will attempt this but there are other procedures that are necessary, like being sure to arrange for publication of a notice to creditors, when you start an estate. I’ve seen a handful of people who’ve tried to do that on their own. It’s not as easy as just filling out the forms and hoping you can save some money by not hiring a professional. I have seen a few people in 35 years of practice who have been able to navigate the probate process on their own, usually when there are only one or two heirs. But most of the time they are going to end up hiring an attorney. They are going to spend as much money (if not more) trying to fix the problem than if they had just retained the attorney in the first place.
People often ask me how much it is going to cost to have estate planning done. I wish I could give them a flat fee all the time, but unfortunately the cost varies depending upon the client’s particular family situation, how they want to make distributions, whether or not they want to avoid probate, whether or not they have family with special needs, and whether or not they own a lot of real estate that has to be transferred with deeds. Unfortunately, there are a lot of different variables that go into determining the cost of doing an estate plan. It can be very reasonable or it can be very expensive. The only way for an attorney to know the cost is to sit down with the client and to spend some time with the client, getting to know their family and what they want to happen in certain circumstances and what they are comfortable with in terms of the type of estate plan and the documents that we prepare.
However, whatever the cost of estate planning, if an estate has to go through the probate process or if other situations are not planned for, the cost of a probate proceeding will almost certainly exceed the cost of doing an effective estate plan.
For more information on Options For Avoiding Probate, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (248) 869-0030 today