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Probate vs. Non-Probate Assets

When you first meet with an estate planning lawyer, the discussion will focus on taking care of yourself and your spouse in your old age. You will talk about retirement savings, long-term care insurance, and appointing someone you trust to make decisions about your healthcare and finances in the event that you become too ill to make these decisions for yourself. In subsequent meetings, you might get into details about whether you would prefer to move to an assisted living facility or senior living community or make modifications to your house in preparation for aging in place.

If you are among the lucky few who are sure that you have already saved enough money for retirement, you might even get to the fun exercise of how much money you can afford to give in cash gifts to your younger family members this year. In 2023, the annual gift tax exclusion is $17,000; you can give up to this amount per recipient without having to pay gift taxes on it. The number of $17,000 gifts you can give in your lifetime is virtually unlimited; only the wealthiest of the wealthy will ever be in a position to max out the lifetime amount.

Eventually, though, you will have to deal with the part of your estate plan that deals with your designated beneficiaries inheriting property from you after you die. A Tampa millennial estate planning lawyer understands that, for the current generation of working-age adults, there is nothing simple about making long-term financial plans.

What is Probate?

Probate is where the court oversees a review of a recently deceased person’s assets and debt obligations. During probate, creditors may file claims requesting repayment of the decedent’s debts from the estate. Probate ends when the estate has filed a final tax return and creditors have had a chance to settle outstanding debts. At this point, the estate settles. When the estate settles, the decedent’s heirs receive their inheritance from the estate as indicated in the decedent’s will. If the decedent did not write a will, then his or her closest surviving relatives inherit the estate according to Florida’s laws of intestate succession.

The court will only go against the instructions indicated in the will in two cases. The first is if someone, usually a family member of the decedent, persuasively argues that the will is invalid because it does not meet the formal legal requirements for wills or because the decedent signed the will as a result of undue influence, which is defined as fraud or coercion by a beneficiary of a will.

A famous Florida probate dispute over undue influence involved a childless widow who left most of her estate to a priest at her church; her siblings alleged that the priest had manipulated the decedent into leaving him most of her considerable wealth at the expense of her surviving relatives. The second is if the decedent’s spouse claims an elective share of the estate. Surviving spouses can claim 30% of the estate if the decedent has children or 50% if the decedent does not have children, and this claim can override the provisions in the will that have the surviving spouse inherit less than the amount of the elective share. This means that it is possible to disinherit anyone except your spouse.

Why are People So Afraid of Probate?

Most of the time, probate is a formulaic process, stressful only in the way that preparing several years of tax returns back to back is stressful. Disputes over the validity of the will are relatively rare. These are some more common problems that can occur during probate:

  • The decedent had many debts, including some that the personal representative of the estate did not know about until after the decedent died.

  • The personal representative must sell real estate property belonging to the estate, whether to satisfy the decedent’s debts or simply because the will orders the sale of the property and the division of proceeds among several heirs. The personal representative must consult the beneficiaries of the will before accepting an offer from a buyer.

  • Medicaid paid for the decedent’s nursing home care and is seeking reimbursement from the estate, as it has the right to do.

In other words, people dread probate because the amount of money that the beneficiaries get to inherit ends up being a lot less than what the decedent owned at the time of his or her death. The personal representative of the estate, quite unfairly, usually gets the blame when this happens.

What are Non-Probate Assets?

One of the goals of estate planning is to protect your assets from creditors by not letting them become part of your estate that goes through probate. Wealthy people are highly skilled at keeping their property out of probate; some multimillionaires have died, leaving an estate that, when the personal representative accurately listed all its contents, was only worth a few thousand dollars. Where did those millions of dollars of property go? The wealthy decedents and their estate planning lawyers transformed them into non-probate assets.

Trusts are the most famous kind of non-probate asset, and while they are popular among the wealthy, you do not have to be a millionaire to place your assets in a revocable trust. When you place your assets in a trust, you can place detailed instructions about how the trustee should dispense the money; if you are worried that your son will blow through his entire inheritance quickly, you can have the trustee pay it to him in monthly or yearly installments. Another strategy is to transfer the title of your property to an heir while you are still alive. Some people think of the annual gift tax exclusion as a means of giving their children an advance on their inheritance.

Contact The Sherer Law Firm About Estate Planning and Probate

An estate planning lawyer can help you protect your assets from creditors during probate so that the designated heirs get their full inheritance. Contact The Sherer Law Firm in Tampa, Florida, to set up a consultation.

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