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Probate is the legal process of settling or administering someone’s estate after they have died. In Ohio, this process begins with the filing of the deceased’s will, if they had one, or with a family member filing to open a probate case if the individual did not have a will.
If the individual died without a will, they are said to have died intestate. Ohio, like all other states, has a specific set of intestacy laws that apply to an estate that does not have a will. The court will appoint an administrator, and that administrator will administer the estate according to Ohio’s intestacy laws.
This will include paying off any debts the deceased had, preparing and filing final tax returns for the deceased and their estate, and distributing the estate’s assets to the rightful heirs. When there is no will, the rightful heirs are determined by the intestacy laws, which specify which individuals will inherit and, when there are multiple heirs, what percentage of the estate they will inherit.
When the deceased’s will is filed with the probate court, the court will first determine its validity. Once that is confirmed, the court follows the instructions in the will to appoint an administrator. The administrator then follows the instructions in the will to administer the estate. Like an estate without a will, the administrator will be responsible for mkaing sure debts are paid and the final tax returns are filed for the individual and their estate. However, when they distribute the assets, they will do so according to the will’s instructions.
Avoid the lengthy and stressful probate process in Ohio by planning ahead with Rhodium Law. Our experienced team will guide you through the steps to secure your assets and ensure your wishes are fulfilled. Start your journey toward peace of mind today.
Probate is not necessarily a bad thing. However, there are several reasons why people, both those who are planning their estate and those who would inherit from it, would prefer to avoid the probate process when possible.
Even if an individual has only a single asset passing through probate, probate will take a minimum of six months. In Ohio, creditors have six months to file their claim against an estate for any unpaid debts the deceased had. Most individuals have more than one asset passing through probate, and even when creditors quickly file their claims, the estate must remain open in probate for that six month minimum. On average, most estates take approximately one year to administer through probate. During this year, the administrator spends many hours on the administration, making it a very time-consuming and inefficient process.
When an estate goes through probate, there are many fees associated with it. Filing, court, and attorney fees are just a few of the fees one can expect to pay. These fees come out of the estate and average approximately 5-10% of the estate’s value. While that may not sound like much, for an estate that is worth $500,000, that is $25,000 to $50,000 lost to probate expenses. That is a significant amount of money that could have been used in other more productive or meaningful ways.
The probate process is a public legal proceeding. This means that anyone is allowed to see the details, including the estate’s assets and their value, the beneficiaries, the executors, any property listed, any debts owed, and any other information included. Why does this matter? This matters because scam artists and creditors will use this information to contact your loved ones and try to scam them or hassle and threaten them into paying your debts, even when they are not responsible for them.
The probate court has two functions: to pay creditors who file claims for debts the deceased owed and to distribute the remaining estate assets—in that order. Why is this a problem? When individuals are creating their estate plan and determining which beneficiary will get what, there are many things they consider: relationships, divorce, student loans, lawsuits, debts, spending issues, and more. An individual may leave an amount of money to one beneficiary to help them pay off student loans while leaving another beneficiary a classic car they restored together for the memories. If the estate goes through probate, however, the money for the student loans may be used to pay creditors and the classic car may be sold to pay more creditors, if there is enough debt. In the end, the court takes an impersonal approach to estates that may leave beneficiaries without the inheritance their deceased loved one intended them to have.
Unfortunately, it is not uncommon for beneficiaries to disagree about property and asset distribution. If just one beneficiary feels as though they did not get their “fair share” of the estate and challenges the will’s validity or the executor’s competency, they will slow the probate process even more and potentially create significant rifts in family relationships. Most people do not want their loved ones arguing and straining or severing family ties over money or assets, but this can happen frequently when an estate goes through probate.
A will does not avoid probate. In fact, a will is the one part of an estate plan that must go through probate. Therefore, while a will does serve a purpose as part of an estate plan, if an individual is seeking to avoid probate, they will want to explore other options for passing their assets on to loved ones.
While most people are familiar with writing a will, and it is the most commonly used component of estate plans, it is also not the only option available for passing assets on. There are several other options, including family trusts, joint ownership, beneficiary designations, transfer-on-death accounts and payable-on-death accounts.
Family trusts allow individuals to both avoid probate and protect their assets. A trust is a legal document that allows the individual to appoint a trustee (which can often be the individual creating the trust) to manage assets placed in the trust for the benefit of the trust’s beneficiaries. The individual can also be a beneficiary of most trusts. Once the trust is properly drafted and the assets are properly transferred into the trust, they are no longer owned by the individual or part of the individual’s estate.
By being removed from the individual’s estate, the assets in the trust cannot be reached by creditors for debts the deceased owed. Putting assets in a trust can also assist with reducing federal estate tax, if the estate is large enough to owe it. If any beneficiaries live in another state that charges an inheritance tax, placing assets in a trust may help them avoid paying that tax as well.
Finally, a trust can provide additional asset protection within the family. If an individual wishes to ensure that assets are protected from a child’s potential divorce, spending issues, substance use issues, or other concerns that could quickly deplete assets, placing them in a trust can ensure that protection. The terms and conditions of the trust can ensure that beneficiaries are financially secure despite such concerns.
Joint ownership is a very common method of avoiding probate. Joint ownership is when an asset is owned by two or more people and when one of those people dies, their share of the ownership is transferred to the remaining owners. This is often seen when married couples own a home or vehicle together. Joint bank accounts are also common. These assets avoid probate because ownership automatically and immediately transfers to the remaining owners.
However, this method of avoiding probate does not avoid creditors attempting to collect a debt. Creditors can still attach their interest to a jointly owned asset and try to collect on the debt after all owners have passed.
Beneficiary designations occur on life insurance policies, retirement accounts, and other financial accounts. A beneficiary designation indicates to whom the policy or account should be paid in the event the named insured or original owner dies. These designations bypass probate and are paid to the beneficiary immediately upon the death certificate being provided. Individuals can also often designate a primary beneficiary and contingent beneficiaries in case something happens to the primary beneficiary.
Beneficiary designations can be very helpful in helping heirs have access to quick cash after a death, and because they bypass probate, they are also private. However, they do not provide any protection. This means that if someone is designated as the beneficiary on a life insurance policy and receives the money, their spouse may be entitled to half in a divorce or a creditor may be able to demand payment from the proceeds. However, a trust can be the beneficiary of most life insurance policies and most financial accounts. By naming a trust as beneficiary, individuals can protect the money and still pass it to their heirs. Once the money is deposited into the trust, the trust terms can stipulate that it be paid out to a specific beneficiary or divided between multiple beneficiaries.
Transfer-on-death designations are similar to beneficiary designations. The owner names who they want the asset transferred to when they die, and upon their death, ownership is transferred immediately. Transfer-on-death designations can be done for assets that hold titles, such as real estate, motor vehicles, boats, or stocks and bonds. The deed or title to the asset is changed to reflect the new owner.
Payable-on-death accounts are also very similar to beneficiary and transfer-on-death designations. Payable-on-death designations apply to assets with account numbers, such as bank accounts, investment accounts, certificates of deposit (CDs), and some life insurance policies. Upon a death certificate being presented, these assets are paid immediately to the individual designated without court intervention. The main difference between a transfer-on-death and payable-on-death account is that a transferred account can remain open and the name changed, while payable accounts are closed and the proceeds paid to the named individual to be placed in a new or existing account or otherwise handled as the individual sees fit.
Depending on the types of assets an individual has, and the estate planning techniques employed, individuals can often ensure that most of their assets pass to their heirs without going through probate first. However, it is important to recognize that avoiding probate entirely may not be possible. For example, the individual may purchase an asset just before their death, have an inheritance that they were unaware of, or have assets they forgot about and did not include in a trust or other method that would bypass probate.
The fewer assets that need to go through probate, the less expensive and faster the process can be. Therefore, even if it is not possible for an individual’s estate to completely avoid probate, using other methods to pass their assets to their heirs can save time, money, and frustration. Additionally, it can ensure that the individual’s intentions behind each bequest is honored, rather than being secondary to the court’s intention of ensuring creditors are paid.
Take the first step towards protecting your family from the stress of the probate process. Contact Rhodium Law today to strategize tailored solutions for avoiding probate in Ohio. Our experienced team is here to guide you every step of the way.
Estate planning may not be fun, but neither is probate. The time that you spend now on planning your estate and ensuring that your wishes are documented clearly and that the gifts you intend for your loved ones will be received quickly and without concern about them being depleted is another gift for your loved ones. An estate planning attorney may be able to review your estate and help you determine the most appropriate probate avoidance tactics to use based on the assets you have. A knowledgeable attorney may be able to assist you in setting up one or more trusts, filling out and filing the appropriate paperwork to purchase life insurance or make certain assets payable-on-death or transfer-on-death, and ensure that no assets are deliberately left out. They will also be able to explain which, if any, assets will need to pass through probate and why, and what you can do to ensure that any new assets are appropriately protected in a trust or other method. Contact Rhodium Law to schedule a consultation and continue the discussion on how you can avoid probate.
