How to Avoid Probate
What is Probate?
Probate is the court process for settling the estate of a deceased person. The executor named in a Will, or a court-appointed administrator if the decedent did not leave a Will, must open an estate file with the Clerk of Superior Court in the county where the decedent was living at the time of death.
The executor’s responsibilities include filing an inventory of the decedent’s property, sending notices to creditors, collecting and distributing funds, and filing accountings. Estates are usually settled within a year after they are opened. However, executors sometimes encounter complexities during the probate process which cause estates to remain open much longer.
The Benefits of Avoiding Probate
Probate in North Carolina has historically been fairly affordable. However, starting September 1, 2005, the fees for filing increased substantially. Prior to September 1, 2005, the filing fee included a charge of four dollars per one thousand of property listed on the estate inventory, with a cap at three thousand dollars.
Under the new law, the cap on the four dollars per one thousand is six thousand dollars. Therefore, the filing fees of an estate with property totaling $1,000,000 would have been $3,000 before September 1, 2005. Now, the filing fees will cost the estate $4,000. Filing fees for an estate with assets totaling $1,500,000, which also would have been $3,000, are now $6,000.
Besides the potentially sizable filing fees, probate can be time consuming and complicated, especially for an executor who has little experience with the process. Also, since all of the court documents are public records, there is no privacy in the probate process. Financial records and other personal information, such as the names of beneficiaries, may be examined by the public.
What Property is Not Subject to Probate
There are several types of assets which are not subject to probate. For example, if a married couple owns real estate in North Carolina, the property will automatically transfer to the surviving spouse. Real estate will also automatically transfer if it is held jointly “with right of survivorship”.
Life insurance and other accounts, such as retirement accounts or IRAs, where the holder named beneficiaries, are not subject to probate. Pay on Death (POD) or Transfer on Death (TOD) accounts are also non-probate assets, since these accounts direct a bank or brokerage company to pay a named person after the account holder’s death. A POD or TOD account differs from a traditional joint bank account because a beneficiary of a POD or TOD cannot access the account during the holder’s lifetime.
Preparing and funding a Living Trust is another effective method to avoid the probate process and associated fees. Any assets transferred into the Trust, before a person’s death, are not probate assets. Unlike probate documents, Trusts are private instruments. Only trustees and beneficiaries need to know the contents.
Most Living Trusts are revocable, meaning the creator, usually called the Settlor or Grantor, can amend, add to or revoke the trust completely. Living Trusts allow the Settlor to retain control over his or her assets. Typically, a Settlor is also the Trustee of the Trust and can determine how much of the income and principal should be used during the Settlor’s lifetime. Living Trusts can also provide for management of assets for beneficiaries after the Settlor’s death.
Conclusion
If you would like to save your loved ones the time and expense of probate after your death, contact an estate planning attorney for more information on these and other options.
Is there a basic/standard formula to determine the range of attorney's fees for an estate settlement? In other words what can the heirs expect to pay to have an estate settled? Interested in North Carolina.
- I believe most attorneys in North Carolina charge by the hour, so the fees can vary greatly depending on the attorney's rates and the size and complexity of the estate. A rough guide is a couple of thousand dollars for a small estate to $20,000 or more for a large, complex estate.
"Pay on Death (POD) or Transfer on Death (TOD) accounts are also non-probate assets, since these accounts direct a bank or brokerage company to pay a named person after the account holder's death."
Does this mean that a TOD account doesn't have to be reported to the state as part of the estate?
Answer: If a probate estate is opened, it would generally be listed on the preliminary inventory, but would not be considered part of the estate for probate purposes. A TOD account is included in one's taxable estate, however, so must be reported on the estate tax return (currently required for estates in excess of $2 million).
If you own a timeshare you should be sure to include it in your estate planning, even if it isn't worth much. I am a probate attorney in a big vacation destination, Las Vegas. A timeshare is considered real estate and must be probated in the state in which it is located. So suppose a person in North Carolina owns a Las Vegas timeshare (or a timeshare in any other state or country). If they die w/o estate planning that timeshare will have to be probated in a special probate proceding in Nevada. A typical charge is $1,500, plus costs of $50-$350, although I am more affordable at a charge of $1000 plus costs. Still, that's a lot of money and hassle for a timeshare that might be worth very little. Proper estate planning for the timeshare would be putting it in a trust, OR putting it in joint tenancy with the person you would want to inherit the timeshare from you.
An estate with a mixture of IRA's, TOD accounts and non specified accounts. Do all get listed on a 90 day inventory and are they all subject to what the Clerk of Court uses in determining a reasonable commission or are some exempt in the calculations?
RESPONSE: Non-probate assets such as IRAs paid to beneficiaries other than the estate and TOD accounts are not commissionable.
I have been advised to avoid probate of my husbands will. He had several pieces of real estate in his name only at the time of his death, 3/1/11. I have an opportunity to sell one of these pieces of real estate very soon, but without probating his will, can I do this?
RESPONSE: If you are the executor of your husband's will, then you have a duty to probate it. I don't in what state you are located, but even then you might not have authority to sell. I suggest that you consult with a probate lawyer in your state.
I live in N.C. and am filing out a preliminary inventory of my mother's estate. She and I had a joint bank account "with right of suvivorship". Part two of the document asks for these type of accounts to be listed so they 'can be used as needed to pay claims". If the value of my mother's assets are not enough to cover her debt, do collectors have the right to take funds from our joint account and if so, how much? All or a percentage?
RESPONSE: Yes. It depends of the exact type of account and possibly the percentage, if any, that you contributed to the account. You will need to obtain a copy of the signature card from the bank and then consult with an attorney.
My mother recently died. She and I held a joint bank account with right of survivorship (and there is just a little more in the account than is necessary to pay final hospital bills). She also had a retiree life insurance policy with named beneficiaries. She had no additional assets--no car, real estate, jewelry, or IRAs or other accounts. Based on this info, can you say whether I need to open an estate with the court?
RESPONSE: It doesn't sound like you need to open an estate.