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Avoiding Probate

There are several needs you might have when planning your estate. This article is to briefly address one I hear with increasing frequency: avoiding probate. And I hear it often for good cause; probate is, by and large, no longer the best way to administer your estate. This article is briefly overviews several different strategies within a plan to avoid probate - any strategy alone may be ineffective, which is why an integrated plan is necessary. Each strategy may also compete with other needs: tax, control, availability, Medicaid, and others - another good reason to have an entire plan.

What exactly goes into probate

Probate is the state system to administer your estate after you pass away. A will is an instruction to the probate, so your will may bring your estate to probate, but so can not having anything at all. In order to make sure your estate is properly administered, there is court oversight. Final approval must come from the court or its commissioner. This is supposed to orderly distribute your assets.

A brief history may help put probate into perspective. A long time ago in England, before America was even an independent country, a will and probate helped a wealthy individual pass his (notice, I don't say his or her, as woman had extreme opposition to own property in that era) land. The landowners made up, if I had to guess, less than 5% of the population. Thus probate was intended to orderly administer the estates of the very wealthy.

Today, probate applies to most all estates - in Wisconsin - estates over $50,000. Anything that doesn't pass by way of contract goes into the estate. Thus begins the administrative headache many try to avoid.

Things that avoid probate

As just mentioned, anything that passes by way of contract doesn't go through probate. A very good example is a life insurance policy. You agree with an insurance agency who the beneficiaries will be. Unless you name your estate beneficiary, the insurance proceeds don't have to pass through probate.

Other contract examples include a transfer on death assignment, a pay on death designation, a life estate for your home, and loans. Another example is a trust.

Multiple contracts can be as difficult as probate

The problem with having several different contracts - multiple life insurances, a life estate, several different pay on death designations with bank accounts - is that you have to keep track of them all. A trust is often times a good solution. A revocable (meaning you can change or destroy it) living (meaning you made it during your lifetime) trust can be a good unifying strategy.

Imagine if your situation changed. You have a new beneficiary or you wish to disinherit someone. You could spend days changing all the accounts. Having all your accounts owned or payed to the trust, including bank accounts, brokerages, annuities, life insurance policies, and properties, means you only have to change one item to change them all.

Cornerstone Law, LLC does not provide legal advice through this website; legal advice, by its very nature, requires a full understanding of your personal situation and can change from jurisdiction (your location) to jurisdiction. This website does not intend to provide legal advice, but instead, provide a general background education on different legal topics. If you would like legal advice, please contact Cornerstone here.

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