Estate Planning 101: How to Avoid the Probate Process

 Posted on November 12, 2020 in Family Law

Probate refers to the legal process by which a court administers the estate of a person who has passed away. This process can be long, costly, emotional, and confusing, especially for those who are not familiar with the legal system. For this reason, it is important to establish an estate plan while you are still alive, to spare your family members the hassle of dealing with the probate court in the aftermath of your death.

Perhaps one of the most difficult scenarios is when a person dies without having a will (legally referred to as dying intestate). When this happens, the assets of the person who died are essentially tied up until the probate court goes through every detail of that person’s estate. When someone dies intestate, there is a complicated procedure that must be followed, including providing notice to heirs and creditors and publishing notice to the general public. Ultimately, the court will distribute assets according to the line of succession set forth under the Illinois Intestacy statute.

This situation is difficult for the family members of the deceased because someone is responsible for stepping up as the administrator of the estate, which is a great deal of work and responsibility. That person is then in charge of paying any outstanding debts or taxes and distributing the deceased person’s assets while being supervised by the court. Gathering assets and paying off debts is often expensive and time-consuming, which delays distributions of property to your loved ones and can deplete assets meant to go to beneficiaries on legal fees.  However, this situation is easily avoidable through proper estate planning tools.

Having a will helps to clearly set forth who you would like to designate as the executor of your estate (the person who is in charge of managing and distributing your property to all of the beneficiaries). It also helps to clearly establish who the beneficiaries are and express your wishes for how you would like your property distributed. However, simply having a will does not avoid probate if you have assets of a certain amount or own real estate. In fact, in Illinois, a will must still pass through probate unless it falls within the category of a small estate. Typically, the will is filed with the court, and the executor is appointed to gather the assets, pay any necessary debts or taxes and distribute the assets to the beneficiaries according to the terms of the will.  Although a will does not completely avoid probate, it does diminish conflict amongst family members as to what you “would have” wanted if you were alive.

The most common and effective way to avoid probate is to create a living trust. A living trust is created by doing essentially two easy steps, first, a document is prepared which designates you as the manager of your finances while you are living and then provides someone else the authority to manage your property after you die. This person is called the Successor Trustee.  Second, you must “fund” the trust with your assets. This is accomplished by transferring title to essentially any substantial asset you own (i.e. real estate, savings accounts, etc.) into the name of the trust. A trust protects your assets from passing through probate because they become controlled by the terms of the trust document that you draft. Upon your death, the Successor Trustee can then transfer the trust assets to your beneficiaries without probate proceedings.  With a living trust, commonly a pour-over will is also prepared, which deals with smaller assets that are not a part of the trust such as vehicles or other personal property.

Another common way to avoid probate is to hold title to your property jointly with the “right of survivorship” with another person. This typically works best with couples and is commonly how married couples hold title to their homes, bank accounts, vehicles, and other property. Note however that you do not need to be married to hold property jointly. When property is held jointly with the “right of survivorship,” probate is not necessary because the property automatically passes to the surviving spouse or owner of the property.

It is also extremely important to ensure that you have designated beneficiaries on your life insurance policy and retirement accounts while you are still alive. These types of assets do not pass through probate but instead pass directly to the beneficiaries listed on the accounts so long as a beneficiary is designated. Similarly, establishing a “pay on death” (POD) designation to bank accounts allows the owner of a bank account to name a beneficiary to receive the funds contained in the account automatically upon their death without court intervention. If you have already designated beneficiaries for these assets, be sure that these remain updated so that your property goes to the people you want it to.

Dealing with the probate process is the last thing someone wants to deal with while grieving the loss of a loved one. The probate process is complicated and can be difficult to navigate. Therefore, taking steps to avoid probate is beneficial to not only you but to your family. If you are interested in learning more about how you can avoid probate, or if you need help navigating the probate process, please contact our DuPage County estate planning attorneys at 630-407-1200 for further assistance.