For most people, the primary motivation for creating an estate plan is to ensure that their estate is distributed according to their wishes after they are gone. If that is one of your primary goals, you most likely wish to provide for your loved ones in your absence as well. Yet, the question remains: How long will it take those loved ones to actually receive the inheritance you leave them? The Overland Park inheritance planning attorneys at Parman & Easterday explain why it could take several months, or longer, before your loved ones receive the inheritance you left them in your estate plan.
How Probate Could Delay the Receipt of an Inheritance
Imagine, for a moment, that you have an estate valued at five millions dollars. Assume the majority of your estate’s value is divided between a home you acquired prior to your marriage, your investment accounts, and your savings account. Your spouse does not work outside the home pursuant to a decision you two made after your first child was born. Ensuring that your spouse and children are financially secure if something were to happen to you is your primary estate planning concern. Consequently, you gift your entire estate to your spouse in your Last Will and Testament. You can rest easy, right? Not necessarily. In fact, you may have made a very common – but detrimental – mistake.
Because you gifted your estate assets to your spouse in your Will, those assets will likely need to go through the formal probate process before they can be released to the intended beneficiary. Even if your spouse’s name is on the accounts and/or jointly owns the house, those assets may still be inaccessible until the conclusion of probate. Furthermore, probating even a relatively modest estate consisting of relatively simple assets can take months, even years. In Oklahoma, a notice to creditors must be filed within two months of a personal representative being appointed. Creditors then have another two months within which to file a claim against the estate. This means that practically speaking it will take a minimum of four months for almost any estate to make it through the probate process. If you own more complex assets, or if challenges to your plan are filed with the court, the time required to complete probate could be extended by many months, even years.
What Can You Do to Prevent a Delayed Inheritance?
If your intention is to ensure that your beneficiaries receive their inheritance as soon after your death as possible, the key is to convert as many assets as possible to non-probate assets. Although probate is often required following a death, not all assets are required to go through the probate process. Careful estate planning that includes probate avoidance tools and strategies can help you achieve your primary goal of providing a timely distribution of assets to loved ones in your absence.
In the scenario above, for example, a few relatively simple changes could make a significant difference. To begin with, make sure that any real property is titled jointly with rights of survivorship (“JTWROS”). When property is titled JTWROS your interest in the property automatically passes to the surviving owner(s) outside of the probate process. This gives your spouse full ownership of the house immediately following your death. Financial accounts can be designated as “Payable on Death” with your spouse (or any chosen beneficiary) as the beneficiary. Similar to your home, the assets held in the account will automatically transfer to the named beneficiary upon your death; however, unlike your jointly titled home, the named beneficiary has no ownership interest in the account while you are alive.
If you are still young and have yet to build up a significant estate, life insurance should also be part of your estate plan. Along with offering financial security in the event of your untimely death, the proceeds of a life insurance policy are paid out immediately to the named beneficiary without going through probate first.
The most important probate avoidance tool, however, is a trust. Unlike gifts made in your Will, assets held in a trust do not go through probate. Consequently, the terms of the trust agreement can dictate that those assets be disbursed as soon after your death as you choose and to as many beneficiaries as you designate. Moreover, a trust can also provide incapacity planning benefits as well as be used to protect the inheritance of a minor child until he/she reaches the age of majority.
Contact Overland Park Inheritance Planning Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns regarding inheritance planning, contact the experienced Oklahoma City or Kansas City area inheritance planning attorneys at Parman & Easterday by calling 405-843-6100 or 913-385-9400 to schedule your appointment today.