Probate is a legal process that takes place under the supervision of a court. It is necessary when assets are going to be transferred through the terms of a will. The probate court would provide supervision if there was no will at all. The process serves a purpose because creditors have a chance to come forward seeking satisfaction during probate before the assets are distributed to the heirs. It also provides a forum for anyone that wants to challenge the validity of the will. Though it is not inherently negative, it is not going to be welcomed by the rightful heirs to an estate. They do not receive their inheritances until the estate has been probated and closed, and it will take eight-twelve months at minimum in most areas. There are expenses that accumulate during probate, and this will reduce the value of the estate. Another aspect of the process that is less than ideal is a loss of privacy because probate records are available to anyone that wants to access them.
Payable on Death Accounts
When you open an account at a bank, you can add a beneficiary or multiple beneficiaries. This is called a payable on death or transfer on death account. We should point out the fact that more than one person can jointly establish a payable on death account. If you have this type of account, after your passing, the beneficiary would first obtain a copy of the death certificate. It would be presented to the institution, and they would inherit the assets. The probate court would not be involved in the transfer.
Getting back to the jointly held payable on death account, a married couple could conclude that this would be an effective estate planning approach. The couple can mutually choose the beneficiaries that will inherit the assets after the death of the surviving spouse. After the death of one spouse, the surviving spouse would have sole control of the account, and they may or may not follow through on the plan. This is a good time to pause.
What if the surviving spouse remarries? It would not be surprising if they develop different priorities? Nor would it be surprising if they were forced or coerced into different priorities, including retitling the assets.
In addition to banks and brokerage accounts, there are some states that give you the ability to name a beneficiary when you register your car or truck. Oklahoma is one of those states. Retirement accounts and life insurance are other types of assets that can be handled via beneficiary designation, which are tantamount to payable on death accounts because the accounts are transferred to a beneficiary outside of probate.
A Better Solution
There is a far better way to sidestep the probate process. A revocable living trust is a very effective, versatile estate planning tool that will facilitate asset transfers outside of probate. You would be the trustee while you are living, so you do not have to worry about losing control of the assets. The successor trustee that you name in the document would distribute the assets to the beneficiaries after your passing. There is no court involvement.
If you have concerns about the money management capabilities of a beneficiary, a living trust can be ideal. A spendthrift clause can be included so the beneficiary is not able to access the principal all at once. If they received the inheritance outright, creditors of your heirs would “step into their shoes,” and take the property your heirs inherited. To make sure that the beneficiary does not burn through their inheritance too quickly, you can instruct the trustee to provide limited incremental distributions over time.
A significant percentage of elders become unable to manage their own financial affairs at some point in time. Another benefit of the living trust is that you have the ability to create “lifecare” for yourself by including provisions that empower a trustee to manage the trust for your benefit in the event of your incapacity.
Access Your Free Estate Planning Worksheet!
In addition to this blog, we have other written materials on this site that you can access, and one of them is our estate planning worksheet. This resource has been carefully prepared to provide you with a better understanding of the process, and it is being offered free of charge. To get your copy, head over to our worksheet access page and follow the simple instructions.
Need Help Now?
If you already know that you should work with an Oklahoma City estate planning lawyer to put a plan in place, there is no time like the present. You can send us a message to request a consultation appointment, and we can be reached by phone at 405-843-6100.