It is widely accepted as fact that avoiding the probate process – the passing of your property upon your death via a traditional will – should be a principal concern in any estate plan. Indeed, a Google search of the phrase “avoiding probate” yields nearly 300,000 results. However, few people can articulate the reasons.
The most commonly asserted justifications are simple: time and money and, as with many generally held beliefs, there is some validity to these concerns. The distribution of an estate through a will may take longer than some alternatives, and there will be attorneys' fees and other expenses.
These concerns are often exaggerated, however. In most cases, the probate process in Pennsylvania is relatively straightforward. Moreover, the estates of those who die “intestate” (without a will) may take just as long or even longer to settle.
Contrary to another widely accepted belief, the estates of Pennsylvanians who die intestate are not forfeited to the state. However, it is true that, in the absence of a will or other arrangements, the estate will pass in accordance with a distribution scheme established by law.
Finally, a will is a sure way to see to it that certain types of wishes, such as making charitable donations or establishing a trust upon your death for a minor child, are carried out.
As is usually the case, however, “one size fits all” legal advice is always suspect and often inaccurate once all facts and circumstances are known. In fact, not everyone does need a will. The value of the peace of mind you'll get if you hear that from an experienced wills and estate lawyer is great in comparison to its cost.
To Help You Better Prepare for Your Legal Consultation, Here Are Summaries of Several Strategies that May Be Appropriate Substitutes for (or Adjuncts To) a Will.
In a properly structured living or “inter vivos” (literally, “during the life”) trust, an individual (the “grantor”) creates the trust and transfers real or personal property (or both) into it. The trustee – who in many cases is also the grantor – manages the trust assets on behalf of a beneficiary (again, often the grantor him or herself, typically with his or her spouse). Upon the grantor's death, the property passes to the designated beneficiary. This is because a properly constructed trust is considered a separate legal “person” which owns the assets. As such, they are not considered part of the grantor's estate.
A word of caution is in order, however. While there are many websites and books offering guidance on the subject, it can be risky to create a living trust on one's own. Only an experienced lawyer can ensure that trust documents satisfy legal requirements and take into consideration all aspects of the client’s circumstances and wishes.
Generally, the holder of an insurance policy, individual retirement or other retirement account or an annuity names a beneficiary. Upon the holder's death, the proceeds will ordinarily pass to the beneficiary outside of the holder's estate. Note that this does not mean that the proceeds are exempt from otherwise applicable inheritance or estate taxes, however.
Joint Tenancy (ownership) with Right of Survivorship
While most often seen among married couples, this form of ownership can exist between any two or more related or unrelated individuals. Unless otherwise stated, joint property, such as a bank account, is deemed by law to have a “right of survivorship”. This means that the property automatically passes to the surviving joint owner or owners. Again, this does not automatically exempt the transfer from taxation.
Transferable (or Payable) on Death Bank Accounts
Your bank's staff can assist you with this. You will need to complete a form designating the person who is to become the account holder upon your death. Remember that, just as with a will, you as the account owner may terminate or change the designation at any time.