Simple Methods to Reduce Probate Costs
Provided by HG.org
Probate is a process in which a last will and testament is approved by the court. The executor is appointed by the court. The executor is responsible for paying final expenses, notifying heirs and creditors of your death and their appointment and of distributing the property in accordance with the instructions of your will.
State law dictates what documentation must be filed with the court and what the executorís duties will be. Generally, no assets from the estate can be administered until debts are paid and other steps are followed.
However, probate can often be expensive. The executor is typically allowed to receive reasonable compensation for his or her services. The longer the probate process takes, the more expensive it usually is. Fortunately, there are several ways that probate costs can be minimized.
Leave a Valid Will
Even though leaving a valid last will and testament will not eliminate the need for probate, it provides a road map of what the executor should do. It also avoids the process of having to locate possible heirs if the court has to follow the laws of intestacy when there is not a valid will. Additionally, the estate is subject to more grounds for contest when a valid will is not in place. An estate planning lawyer can help prepare a valid will.
Before the executor can distribute assets, it must pay final expenses. If a person owes a number of debts at the time of his or her death, the process will be longer. Testators can reduce probate costs by staying up-to-date on all bills and paying off any residual debt. This will help decrease the number of tasks the executor has to do at the testatorís death. The testator may also wish to prepay for funeral and burial expenses to reduce the executorís responsibilities. Additionally, if the testator does this, he or she may avoid the family making emotional decisions with financial consequences by being talked into more expensive options while they are grieving.
Get Rid of Property Out of State
If you own real property out of state at the time of your passing that has not been accounted for, you will likely need to set up a second, ancillary probate case in the other state. This can increase the costs because there will be an additional filing and another executor may be required to handle this property if the primary executor lives in a different state. Property can be transferred by a deed during your lifetime or possibly a beneficiary deed that only becomes effective at the time of your death. Alternatively, the property can be owned through joint ownership in which the other owner receives your share automatically at the time of your death. You may also choose to sell such property if you are not using it.
If you do now own an asset at the time of your death, your estate is reduced in value. Probate costs and executor payments are usually a percentage of the total value of your property. Therefore, giving gifts away can reduce the total value of your estate and the associated fees.
Spend Down the Estate
Many states have small estate administration procedures that are much faster and cheaper than the traditional probate process. The state determines the maximum value of the estate in order to use these preferred procedures. Some states establish the value at $100,000, but state law varies. By getting the value of the estate under this amount, the executor may be able to take advantage of the small estate administration process.
Transfer Property Outside of Probate
Probate costs are typically associated with the value of the probate estate. By removing this property from the estate, the value goes down along with the costs. Probate property may be removed by leaving a transfer on death registration, beneficiary designations and deeds. Additionally, you may be able to set up a trust to transfer your property.
Contact an Estate Planning Lawyer
An estate planning lawyer can employ strategies to help you reduce the costs of probate. He or she can draft a valid will. Additionally, he or she can advise you on gifts, revocable trusts and other arrangements you may make to decrease the value of property that you own at the time of your passing. Additionally, he or she can walk you through other techniques to help you reduce the costs of probate and enjoy other estate planning advantages.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.