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Dec 2016
22
December 22, 2016

Avoiding Probate Does Not Equal Avoiding Inheritance Disputes


No one wants to die and set the stage for loved ones to fight over their assets. Unfortunately, inheritance disputes are not uncommon. Sometimes these disputes are the result of bad blood in the family. But other times, bad planning can cause confusion about what the deceased person intended and a dispute ensues.

Some people have been told “you should avoid probate.” But avoiding probate does not translate into avoiding an inheritance dispute. The probate process — going through the state court system to transfer a deceased person’s assets to his or her heirs — has a bad rap. Yes, going through the court system and having to file specific documents at specific times can seem like a burden. But the process is not that bad and is certainly better than an inheritance dispute. 

As an inheritance dispute specialist, I see a number of cases in which people go to great lengths to avoid probate, and these efforts cause family disputes because the deceased person’s intentions were not clear. Here are three examples of how trying to avoid probate can backfire:

Joint Accounts

One way to avoid probate is to put a joint owner with rights of survivorship on a bank account. There is a legal presumption that the funds in a joint account will transfer to the surviving owner at the death of the first joint owner, and as a result, pass outside of the probate process. A problem arises if only one family member is named on the joint account, but the deceased person intended a broader group of people (e.g. other kids) to share in the funds at death. If an account names the estate as the beneficiary, and the will names the larger class of people as beneficiaries, passing the funds through the estate would fulfill the deceased person’s intent without creating a dispute over who is entitled to the joint account funds.
 
Delayed Gifts

Another way of avoiding probate is to deed real estate or gift assets to the intended heir during the giver’s lifetime. Lifetime gifting can avoid probate. Problems can occur with this plan if the gift was not intended to go into effect until the giver’s death. For example, consider the situation in which parents deed real estate to their son. Legally, the son is now the owner and could sell the real estate against his parents' wishes. Here, the parents did not intend for the gift/ownership to go into effect until their death. Leaving the real estate to their son in their will to pass through probate would accomplish their goal of gifting the property to their son at their death, but not before.

Unnecessary Trusts

Another way to avoid probate is to place assets into a trust. Trusts have benefits for some people, but for others a trust causes more complexity, confusion and opportunities for the family member/trustee in charge to “mess it up.” Some people are led to believe that everyone needs a trust. This is not the case and there is not a one-size-fits-all estate plan for everyone.

These are important examples of how trying to avoid probate can actually backfire. We recommend talking through your intentions and goals with one of our estate planners so that your assets will pass as intended without creating unnecessary confusion, complexity or discord at your death. And you might find that going through the probate process is the best fit for you after all.      

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