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How to avoid probate

Probate may be an essential part of estate planning in Arizona. However, planning should also include options for avoiding probate because of its costs and inconvenience.

Probate is the entire legal process of settling and administering a decedent's estate. It requires appearing before a judge to prove that the deceased's last will and testament is authentic.

This procedure is long and often costly. Generally, a petition for probate is filed and the named executor is usually named as the will's administrator. If there is no will, the court will make this selection.

Heirs and beneficiaries must be notified, and a notice needs to be published in local newspapers. The validity of the will must be proven. An inventory of the estate's assets and liabilities must be filed, and some assets may be appraised.

Creditors also should be notified, and federal and state tax returns need filed. Debts and taxes must be paid. Finally, the court must grant permission to distribute property.

During this time, property cannot be distributed to heirs and beneficiaries. Legal and other expenses mount. Because public notice is required, all probate files become public and anyone can see who died, the estate's contents and the identity of heirs and beneficiaries, and what they inherited.

There are methods to avoid probate. Setting up a trust allows the direct transfer of assets to the named beneficiaries. Joint ownership with a right of survivorship allows the automatic transfer of full ownership to the co-owner with much less paperwork.

Also, many contracts have beneficiary designations that do not have to undergo probate. These include life insurance policies, annuity contracts, retirement accounts and health savings accounts. Beneficiaries may also be identified on bank accounts, securities, vehicles and real estates with a transfer of death agreement.

Finally, gifts are also used. Property may be given to the children, charity or other individuals before death. There may be tax or other estate consequences which should be considered, however.

An attorney can help develop an estate plan that meet needs and avoids probate. They can draft valid documents that comply with Arizona legal requirements.

Source: Charles Schwab Investopedia, "Why and how you should keep an estate out of probate," By Jiyao Xu, CFP, Jan. 9, 2018

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