Probate avoidance is often a worthwhile goal when it comes to estate planning. But it is also important to remember the limitations of this, to be aware that successfully avoiding probate does not mean that every problem with your estate plan will be dealt with because of it. For instance, taxes, inheritance rights, and debts will remain uninfluenced by whether or not your estate goes through probate. Keep reading to take a closer look at each aspect in turn.
Taxes: Federal taxes will be the same, whether there is probate or not. Large estates could be hit with gift and estate taxes either way. Smaller estates could still face state taxes.
Inheritance Rights: Usually, the fact that your family will inherit your estate is something you very much wish for. But just to be clear, probate has nothing to do with inheritance rights. In community property states, spouses own half of the estate. In your will, you get to decide what happens to separate property and your half of the property. In other states, a surviving spouse can usually receive one-third to a half of the estate.
If your will was made before one of your children was born, meaning that they are unwittingly left out, state laws will remain unchanged as to how much a child is owed from a deceased parent's estate. Better yet, you can redraft you will so that each child is mentioned. Finally, when it comes to grandchildren, they have no inheritance rights unless their parent is deceased. In that case, the grandchild would assume the deceased child's inheritance rights of the parent's estate. Again, probate or avoiding probate has no bearing on this at all.
Debts: Finally, probate avoidance will not really affect a creditor's right to collect debt. If you still have outstanding debts, it is possible that some of your estate could be liquidated to satisfy creditors. But, if your estate goes through probate, then creditors usually have only a matter of several months to make a claim on a portion of your estate. If your estate avoids probate, however, then creditors have much more time within which to file a claim.
So when it comes to debts, is it better for some of your property to go through probate? Usually speaking, this is still a no. If your property goes through probate, your creditors have to be given notice. But if your property bypasses probate, then your creditors do not have to be alerted to your passing at all.
To learn whether avoiding probate is right for you, and to discover which estate plan strategies are best for your situation, talk to an estate planning attorney today!