By
Monet Binder, Esq.

Here are
important questions to consider: When was the last time you had an estate
planning attorney perform a full review of your long-term plans for your
financial affairs, your family, and your legacy?   For that matter, have you ever sought out such a review? Have you
taken the necessary steps to keep your estate out of probate when you pass on?

Many individuals
believe their estates are protected against probate. But thanks to changes in
your finances over time – and perhaps misconceptions you hold about the probate
process and what triggers it – that protection can erode or disappear entirely.
In fact, many people are blissfully unaware just how vulnerable their estates
are to probate.

This lack of
awareness can have serious consequences for the next generation and any charities
and causes you support. If you fail to identify these issues, your family may
discover them at the worst possible time. 

So, what can you
do to stay current and complete? The answer is simple: conduct periodic strategic reviews of your estate plan to ensure that
it’s probate proof and otherwise up to date.

Understanding the probate process

Technically
speaking, probate is not a bad thing. The process is simply the government’s
way of making sure your property is distributed in the right directions when
you pass away. This process includes proving the validity of your Will (if you
left one), evaluating your property, paying off your taxes and debts, and
disbursing whatever is left to your heirs.

Most people
understand that if someone dies without a Will (or “intestate,” in legal circles), a person’s belongings will go
through probate. Perhaps fewer people realize that creating a Will, itself,
does NOT protect their property from probate. The process can move more
smoothly when you have left a Will stating your intentions for your belongings,
but any part of your estate that is
titled solely in your name, at the point of your death, is subject to probate,
regardless of the existence of a Will.

Why probate is generally something to avoid

●    
Probate can be costly. The total cost
of probate can be anywhere from 5 percent or more, of the total value of the
estate, in New York. These costs are deducted from the estate, which means your
beneficiaries will never see that money. 

●    
Probate can be time-consuming. Even for a
modest-size estate, probate can last between 6 months to a year, provided there
are no complications. Your heirs won’t receive their inheritance until probate
is complete.

●    
Probate is public. One of the biggest
drawbacks to probate is that it makes private matters public. When your estate
is probated, your financial information, identities of your heirs and other
personal information all become a matter of public record, accessible to anyone
who wants to look it up, possibly even online, depending on the court system
where your estate is probated.

Strategies for probate-proofing your estate

The good news is that probate is quite easily
avoidable, and there are a number of effective planning tools that can help
you. Since probate only applies to assets listed solely in your name, the
primary goal of your estate-planning strategy might simply be to make sure you’re not the sole owner of those
assets when you pass away.

For now, let’s look briefly at two general
strategies for probate-proofing your estate, and the pros and cons of each.

Strategy 1: The “Piecemeal” Approach

This strategy involves going through all your
assets one by one and structuring them so that they are either jointly-owned
with one or more of your heirs or transferred immediately upon your death. For
example, for any bank accounts or investments, you might add one or more
beneficiaries as a joint owner, or insert a Transfer on Death (TOD) or Payable
on Death (POD) clause that immediately transfers ownership to the other party
when you pass away. For insurance policies and certain other assets, designating
a beneficiary may be sufficient to protect them from probate.

PROS and CONS: For simpler or smaller estates, the piecemeal
approach can be an effective and affordable strategy to bypass probate, at
least for your largest and most important assets. On the other hand, this
approach requires constant, vigilant updating, and in many cases these updates
can be overlooked. If you were to sell or reinvest your assets, or cancel an
insurance policy due to high costs of premiums, and pass away suddenly, without
updating your plan, your assets would be subject to probate, and your intended
beneficiaries could lose their inheritance or might eventually get a cut of
some of your assets once the fees, debts and taxes are paid.

Strategy 2: Creating a Trust

A more thorough and highly effective strategy to
protect against probate, is to create a revocable
Trust that encompasses all your holdings. A Trust is a legal structure in
which your property is held on behalf of your beneficiaries, to be managed and
appropriated by an appointed Trustee. In a living Trust, you can name yourself
the Trustee until you pass away or become unable to manage the Trust, at which
point an appointed successor takes over. Under this arrangement, you have the
same access to your property as you did before, with the exception that it is
no longer exclusively in your name and is therefore exempt from probate. When
you pass away, the holdings in the Trust pass to your beneficiaries per your
instructions with no interruption or interference from the probate courts.

PROS AND CONS: This arrangement requires
some time, effort and cost to initiate and fully fund, so that it covers all
your property.  Once established, it is
easily adaptable to changes in your family and financial situation, and equally
easy to keep updated. A Trust can also handle almost any asset and easily
accommodate advanced tax planning, unlike the piecemeal approach. This approach
provides greater asset protection in the case of disputes, and you can even
continue to grow your wealth on behalf of your beneficiaries after you die.
Perhaps most importantly, a Trust that is properly constructed and managed is
your best protection against probate.

A Skilled Counseling-Based Estate Planning
Attorney can help you probate-proof your estate.

The safest way to create a probate-proof estate
plan is to work with an estate planning attorney to devise a customized
solution. Then update that plan regularly to reflect any changes that occur in
the future. If you haven’t reviewed your estate plan in a while, now is the
best time to make sure your estate is probate proof. Call
718.514.7575 or email [email protected].

MONET BINDER,
ESQ., a practicing attorney, in New York,  for over 20 years, is dedicated to protecting
families, their legacies and values. All halachic documents are approved by the
BAIS HAVAAD HALACHA CENTER in Lakewood, under the direction of Rabbi Dovid
Grossman and the guidance of Harav Shmuel Kaminetsky, shlita, as well as other
leading halachic authorities.

The information in
this article is intended solely for your information. It does not constitute
legal advice, and it should not be relied on without a discussion of your
specific situation with an attorney.