Using Deeds to Avoid Probate
WHEN ARE YOU STUCK WITH PROBATE?
There are 3 basic situations where you might find yourself stuck in Hawaii’s probate court, dealing with the distribution of your loved one’s assets. First, probate is required when someone dies without a will. This process is referred to as administration and it is governed by the Hawaii Revised Statutes. The executor and heirs are determined by law and in order to ensure the just administration of the estate, outside experts may be required and their fees will be deducted from the assets of the estate.
Second, you might find yourself in Hawaii’s probate court if your loved one died with a will and either (a) the estate is worth more than $100k, or (b) the estate owns real property. In either case, you can use an “informal” proceeding unless there is a reasonable likelihood of disputes or objections from family members, heirs, or disinherited heirs. The potential for conflict necessitates a “formal” proceeding.
Third, even though the deceased might have created a living trust, probate needs to be opened when not all of the deceased’s assets were owned by the trust. This is often the case with an old bank account or vehicle. When a living trust is created, a pour-over will should be executed at the same time. This special type of will acts to transfer all of the deceased’s assets to the trust. So after a quick probate, the trust controls all of the assets and the successor trustee can now make the required distributions.
To recap, the 3 main scenarios where probate will be required are when:
The deceased doesn’t have a will;
The deceased has a will but either:
Has a total value of more than $100k
Owns real estate;
The deceased created a living trust but didn’t transfer all of his/her assets to it.
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WHAT HAPPENS IF YOU DON’T PLAN AHEAD?
Probate is a court proceeding and it therefore requires time and money in order to be completed properly. The costs of probate are usually paid by the estate, which reduces the amounts that heirs will receive. It also opens the door to possible disputes among family members, heirs, and disinherited heirs. While probate is ongoing, heirs are losing potential rental income or the current value of the assets. There is the risk of changes in the market that significantly reduce the overall value of the assets. And financial obligations of the estate are not paused—the estate has to continue paying a mortgage, property taxes, association fees, etc. All of this effects (and usually reduces) what the heirs are intended to inherit.
WHAT CAN YOU DO to avoid probate?
All of this can be avoided or minimized to a known quantity with a legal consultation and a few essential documents. Depending on your situation (your assets and goals) there are many options. The advantages and disadvantages of each may vary for each individual, but they are generally accurate for everyone.