When "The King," Elvis Presley died in 1977, his estate was worth an estimated $10 million dollars. Then came probate. After all the fees: legal, appraisal, executor's fees, and estate tax, the Presley estate was reduced to a paltry $3 million dollars. What happened to approximately 73 percent of Elvis' estate? The answer is simple: probate.
So, what is probate? Probate is the process of clearing a will as either valid or invalid and making sure that no one has a challenge against it. Probate also clears the estate of all debt, by paying creditors against the estate. All of this goes through a sometimes very lengthy court process, which can take a lot of money away from the estate. Whether or not a person has a will when he dies or not, the estate must go through probate.
There are ways to avoid some of the pitfalls of the probate process. One of the best ways is to establish a trust. If assets and property are in a trust, they do not have to pass through the probate court and can go directly to the beneficiary, relatively quickly. These assets also can be protected from creditors against the estate by using a trust.
You can also protect your assets from probate costs by regularly updating the beneficiaries to your 401K, IRAs, or life insurance policies. If you will update the beneficiaries regularly, then you can avoid unwanted inheritances, because these designations are not subject to probate.
But these two aren't your only options. You can also choose own property with someone else. If you own something with someone else and anything were to happen to you, the property would automatically pass to the survivor. Some banks also allow you to set up a Transfer on Death (TOD) account, where you can name a beneficiary to your personal banking accounts. Upon death, the accounts would automatically transfer to the person you named.
Another option to avoiding probate pitfalls is to give your assets away to your relatives while you are still alive. You can gift your relatives with the maximum tax-free amount ($11,000 in 2005.) By giving away your assets, you reduce the amount of property that has to pass through probate upon your death.
If you properly plan your estate with the help of an estate planning attorney or other financial professional, you can decrease probate costs greatly. There are not many people who like to think about what will happen when they leave this earth, however the thought of family and friends not getting what you leave to them is distressing also. A little planning ahead of time could save your beneficiaries a lot of money in the end. Elvis Presley's estate was obviously neglected and his untimely death costs his daughter and other beneficiaries millions of dollars. With the help of Priscilla Presley, Elvis' daughter, Lisa Marie has managed to rebuild the Presley estate, which now has a net worth of around 250 million dollars. The estate recovered from the devastating blow that probate dealt it.
Milos Pesic is a Certified Financial Planner who runs a highly popular and comprehensive Probate web site. For more articles and resources on probate process, how to avoid probate, probate court, probate law and much more visit his site at:
=> http://probate.need-to-know.net/
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