Protecting Heirs From Probate

by | Apr 28, 2018 | Uncategorized | 0 comments

There are two approaches to shielding heirs from probate – a piecemeal approach and a global solution.

The piecemeal approach involves cobbling together many small steps, each of which excludes a single account or asset from the probate process.  For example, each bank account and each stock broker account can be given a Payable on Death beneficiary designation.  Real estate can be placed into various forms of ownership that avoid probate, such as Joint Tenancy or Life Estate forms of ownership.

Unfortunately, the piecemeal approach suffers from three significant shortcomings.

First, if enough assets have no such special form of ownership, the remaining assets may still have to go through the probate process.

Second, the joint forms of ownership of real estate that are available usually open up that real estate to the claims of the creditors of the children or other heirs who are added to the title.  The result is that those creditors may be able to have the real estate sold to satisfy the children’s creditors even while the parents are still alive and living in the property.  Such results are disastrous.

And finally, once a child or other heir’s name has been added to the real estate title, it cannot be taken off by the parent without the consent of that child or heir.  The transfer may turn out to have been ill-advised.

The global solution to these issues is normally the creation of a Family Trust.  The creation of the trust and the transfer of the assets into the trust enables the parents to retain sole control of those assets as long a s they live.  It does not expose the assets to the claims of the creditors of the intended heirs.  And changes to the trust that redirects an inheritance to an alternate heir do not require the consent of the previously-designated heir.

On balance, creating a Family Trust is almost always the superior solution to the probate quandary.  The trust not only avoids probate, it avoids probate twice in the case of a married couple.

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Daniel Patchin

Barry Peters