When an adult dies, any property they own typically becomes the property of their estate. Their estate must pass through probate court in most cases before the personal representative of the estate can distribute assets to beneficiaries.
During probate court proceedings, creditors have an opportunity to make a claim against the estate. Credit card companies, student loan providers and even the Medicaid estate recovery program could force the sale of estate resources and diminish what beneficiaries or heirs actually receive.
People putting together or updating an estate plan often look for ways to keep valuable property out of probate court to protect it from creditor claims and other challenges. For many people, the home where they live and other real estate holdings could be their most valuable assets.
How can people keep real property like this out of probate court?
Changing ownership in advance
The simplest strategy for bypassing probate court is to adjust ownership records. If an asset is not the sole and separate property of one individual, then it may not end up included in the estate. When the asset in question is real property, there are a few strategies that can work.
For example, an individual living with a spouse, unmarried romantic partner, child or close friend could record a deed. They could change how they hold title. By becoming joint tenants with rights of survivorship, the owners of real property ensure that when one dies but the other survives, the surviving owner assumes control over the home.
In some cases, the best option might be to use the home to fund a trust. By making a trust the legal owner of the property, the testator keeps it out of probate court and retains long-term control over the use of the property even after their passing. The value of the real estate, whether it serves as a primary residence and the intentions of the owner for the property after their death all influence the best solution when addressing real property holdings in an attempt to minimize probate risks.
Discussing estate planning goals and personal resources with a skilled legal team can be a good starting point for those who want to optimize the legacy they leave when they die. Testators who create custom estate plans can often leave a more meaningful legacy than those who fail to consider the possibility of probate complications undermining their wishes.