After a loved one dies, the last thing you want to think about is going to court and dealing with a messy and complicated probate process. However, unless you have a very small estate, or you work with an attorney to build a comprehensive estate plan, your family and friends might find themselves in exactly this situation.
Fortunately, it doesn’t have to be this way. In this article, we’ll go over how you can help your loved ones avoid the stress and frustration of probate.
What Is Probate?
Probate is the process of itemizing a deceased person’s property, paying his or her debts, and distributing their remaining assets. This process requires appointing a personal representative for the person’s estate (which is simply a legal term for their assets plus their debts), filing documents with the probate court, and attending formal hearings.
Probate usually lasts about six to nine months and can require dozens of hours of work over that time. And that’s just an average case; some probate cases drag on even longer and require even more effort. Even if you participate in “informal probate,” which is a slightly simplified process, the whole ordeal can be time-intensive, costly, and confusing.
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Thankfully, not every estate requires probate. With some advanced planning, you and your lawyer can set up your estate in a way that allows your loved ones to get your estate through probate much faster or even bypass probate court completely.
Not All Assets Require Probate in Michigan
First, it’s important to understand that your estate doesn’t necessarily include all your assets. Certain types of property, like life insurance benefits and funds in retirement accounts, don’t have to transfer through probate. Instead, they pass directly to designated beneficiaries or joint owners.
Here are some other examples of assets that don’t need to go through probate:
- Property held in a living trust
- Pension plan distributions
- Unpaid wages
- Income tax refunds
- Cars, trucks, and other motor vehicles, as long as the combined value of all motor vehicles doesn’t exceed $60,000
- Boats and other watercraft, as long as the combined value of all watercraft doesn’t exceed $100,000
So, for example, if your estate consists only of a life insurance policy, unpaid wages, income tax refunds, and a car, your loved ones might not have to deal with probate at all.
Jointly Owned Property
Jointly owned property is not always part of your estate. If your loved one has right of survivorship in a jointly owned asset, such as real estate, a bank account, or a car, the asset will automatically transfer to them when you die.
However, it’s important to understand that not all types of joint ownership come with rights of survivorship. For example, if an unmarried couple purchases a house and the documents don’t refer to them as joint tenants, the courts might consider them tenants in common. In this case, each partner only retains their share of the property when the other dies rather than receiving the entire property.
Because of tricky cases like this, it’s always in your best interest to consult an experienced attorney when you designate someone as a joint tenant or joint owner for estate planning purposes.
Insurance Policies and Retirement Accounts
When you designate a beneficiary on a life insurance policy or retirement account, that person does not have to go through probate to receive his or her benefits after your death. Instead, they must file a series of claim forms with the insurance company or financial institution.
Sometimes, people forget to update their beneficiaries on insurance policies and retirement accounts. If you haven’t checked your designations recently, make sure to review them. You might find that you need to change your beneficiaries due to a recent life event like a marriage, divorce, or birth.
If you need help identifying all your named beneficiaries and assets, contact Phillips & Santana for a free consultation. We help our clients understand their estate planning options and implement solutions that help protect their loved ones.
Most Small Estates Can Avoid Probate
In Michigan, you can transfer small estates without the probate court’s involvement. For people who die in 2018, Michigan law defines a small estate as one that’s worth no more than $23,000 after deducting funeral and burial expenses. (Note that this amount changes from year to year.)
Instead of taking a small estate through probate, you can do one of the following:
- Transfer by affidavit: You draft and sign a document that outlines how you’ll divide the estate. You can present the signed affidavit and a copy of your loved one’s death certificate to transfer ownership. Note that you cannot transfer an estate by affidavit if it includes real estate.
- Assignment of property: Unlike with a transfer by affidavit, a judge needs to review and approve an assignment of property. The judge will divide the estate according to Michigan’s intestacy (inheritance) rules. While this option does require a judge to review your paperwork, it typically doesn’t involve a formal hearing.
While neither of these processes requires court hearings or the formalities of probate, you still need to fill out plenty of paperwork and avoid making any mistakes. If you believe an estate is eligible for a transfer by affidavit or assignment of property, contact Phillips & Santana for a free consultation. We can advise you about your options and help you properly wrap up your loved one’s estate.
Create Living Trusts for Your Loved Ones
If you have a larger estate, you can still avoid or minimize probate by creating a living trust. After you set up a living trust, you’ll transfer assets to the trust and designate beneficiaries. Typically, you are the trust’s beneficiary while you’re alive, and you can still use the assets you place in the trust.
RELATED ARTICLE: Is a Living Trust Better Than a Will?
When you die, another set of beneficiaries will gain access to the assets in your trust. Based on your wishes, this could include your children or grandchildren, an unmarried partner, or other loved ones. However, because you transferred the property to the trust during your lifetime, none of it has to go through probate.
However, not all types of trusts avoid probate. Testamentary trusts, which are funded at your death, still require the probate court’s involvement. To avoid costly mistakes and unnecessary litigation, you should always consult an experienced estate planning lawyer before you create a trust.
Law Offices of Kari Santana: Estate Planning for West Michigan Individuals and Families
At the Law Offices of Kari SantanaSantana, we don’t just craft detailed estate plans. We also work with our clients to build long-term relationships grounded in trust, respect, and shared goals.
If you’re interested in learning more about our practical, collaborative, and affordable approach to West Michigan estate planning, contact us today and schedule your free consultation. You can either complete our online contact form or call us at 616-717-5759.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.