How to Avoid Probate

There are only two ways I know of to avoid probate:

1. Don't own anything solely in your name when you die without a joint owner or beneficiary.
2. Re-title all of your assets into the name of your Trust.
   

Make a list of everything your name is on and consider what will legally happen to it when you die. Designate beneficiaries for anything that allows. Use a ladybird deed or a joint ownership deed for your real property. Talk to an estate planning attorney about this if you are unsure of what needs to be taken care of before you die.

A correctly drafted and funded Trust is the only other legal document that will prevent your property from being subject to administration by the probate court.

A Trust is a legal document that appoints a trustee and backup trustees to administer your property. Most people are the trustees of their own trust while they are alive. However, once you die your successor trustee immediately becomes the active trustee and has all the sames powers you had while alive to handle your affairs. The trustee can sell property, buy property, distribute property but will eventually want to handle your affairs and close out responsibility.

A Trust only works so long as the property you own is titled in the name of the trust - that is how the trustee has control and authority. Unlike having to go to the probate court to request authority to administer the decedent's affairs for an estate without a Trust in place.

For example, instead of having your bank account in your name as Betty and Bob Thunder; your bank account will belong to the Betty and Bob Thunder Trust.

Trusts are also a good way to plan for blended families - a trust can prevent the natural law of intestate succession from occurring where the kids of whoever dies first are totally left out. See an attorney who specializes in trusts to have one drafted and funded.

Probate Court Forms

Luckily in Michigan, the probate courts in all counties use approved forms to make filings to open and administer and close probate estates.

These forms are found here: http://courts.mi.gov/Administration/SCAO/Forms/Pages/Probate-Court-Index.aspx

I will update this blog post soon to advise which forms should be used for what.

Who are heirs? Interested parties?

There are some terms that describe people involved with a decedent's estate that are important to understand the difference between - heir, beneficiary, interested party, devisee.

HEIR
We will start with an heir. An heir is determined by law and is a lineal progression of the decedent's relatives. Heirs are important when there is no Will or Trust in order to determine who is legally entitled to the decedent's property (after any required debts and expenses are paid in the case of a probate estate). When a person dies without a Will we say they died "intestate". Thus, the following is intestate succession:

Decedent
Level 1: Surviving Spouse
Level 2: Children (including adopted children but not step-children if not legally adopted by decedent)
Level 3: Grandchildren
Level 4: Parents of Decedent
Level 5: Brothers and Sisters of Decedent
Level 6: Nieces and Nephews of Decedent
Level 7: Grandparents of Decedent
Level 8: Deceased Spouse's Side of the Family
...

For example, if Decedent dies without a Will then all of the decedent's property goes to the Surviving Spouse, (if alive aka "surviving"). If there is no surviving spouse, then all of decedent's property goes to the decedent's children (split equally between them) and so on.

In order to be qualified as an heir, the person must survive the decedent by more than 120 hours.

*When dealing with a larger value of property to distribute other laws may come into play as far as how much of that value goes to the heir and is split with the next heir in line. Seek the advice of an attorney if the value of the distribution is greater than $200,000.

BENEFICIARY
A beneficiary is a person who is named on a document to automatically become the owner of the property upon the death of the decedent. For example, you can name beneficiaries to a life insurance policy or to a bank account. Anytime a beneficiary is named, this particular property is not subject to the probate court and the beneficiary automatically becomes the new owner upon the decedent's death.

INTERESTED PARTY
Sometimes a family member is not named in the Will but is a direct heir at law and thus is an interested party. Interested parties only come into play during a probate estate. Interested parties are entitled to receive notice of probate proceedings. Creditors of the decedent's estate are also considered interested parties as they have a direct interest in the distribution of any assets since they want to be paid.

DEVISEE
When filing an application or petition to open a probate estate in Michigan, you will need to designate those individuals who are found in the Will but who are not a direct heir at law to the decedent - they are called nonheir devisees. For example, a man dies leaving a surviving spouse and children but writes in his Will that his friend Joe Shmoe gets $10,000. Joe Shmoe is a nonheir devisee.

There is a Will so the estate has to be probated? No!

A Last Will & Testament is a legal document that nominates a person to handles the final affairs of the decedent and IF a probate estate is required to be opened with the court, the Will is admitted as evidence of the decedent's intent.

Estates may go to probate with or without a Will - probate all depends on whether someone needs legal authority to transfer property of the decedent or not.

If the decedent's estate does not need to go to probate, the family should honor the last wishes of the decedent by following any direction in the Will to distribute the decedent's property.

Although a probate estate may not need to be opened with the court, the estate may still end up in probate court if an interested party files a court action to challenge the actions of the person distributing property according to the Will.

What You Can Do Without Probate

If you do not need to open a probate estate to administer the affairs of the decedent, here is what you can do:

• File claims for payment of life insurance to the designated beneficiary.
• File applications to roll-over retirement accounts to the designated beneficiary (or cash them out if applicable).
• File the death certificate with the county register of deeds (for the county the house is located in) in order to change the joint ownership of the property to sole ownership by the surviving owner.
• Take the title to vehicles along with the death certificate to the Secretary of State's office in order to transfer the title to the spouse or child.
• Present the death certificate to banks to have the decedent's name removed from a joint bank account into the surviving owner's name only.
• Sell, distribute or keep personal property in the home belonging to the decedent according to the Will (and if no Will exists then as agreed to by the spouse or children, or surviving heirs).

*Remember, just because the decedent left a Will does not mean that the estate has to go to the probate court. However, the individual named as Personal Representative or Executor of the Will should distribute the decedent's property as set forth in the Will.

What to do when a loved one dies?

This post discusses the first steps to take when a loved one dies in regard to their property. Amid all of the grieving and family plans, often the ones left behind have no idea where to start and here are my basic recommended steps. Rather than dancing around the words "dead person" I use the legal term "decedent".

1. Create a list of everything the decedent owns.
2. Determine which of the items on the property list is subject to probate or not. (See prior blog post for help with this).
3. Collect the decedent's mail so you know what outstanding debts (creditors) the decedent may have.
4. Search for a Last Will & Testament or Trust Documents.
5. Verify whether or not the decedent had any safe deposit boxes at the local bank - sometimes valuables or a Will may be left behind in a deposit box.
6. Contact the decedent's employer or any source of income to the decedent to let them know of the death and ask if there are any insurance policies or retirement plans belonging to the decedent.
7. Look through files of the decedent to identify any bank accounts or other investment accounts owned by the decedent.
8. If the decedent lived alone, secure the home and pay utility bills to maintain the house, if needed.
9. Do not pay creditors with your own money, unless the bill is for a piece of property like a boat, car, or house that you intend on keeping for  yourself (if you are legally entitled to it).
10. Get several certified copies of the death certificate from the funeral home.
11. Contact a lawyer if you need help.

If you need to open a probate estate for the decedent, you do not have to rush into doing this but understand that you will not be able to close out bank accounts or sell a house, for example, until the probate estate is opened. There is no deadline in Michigan to open an estate with the court.

What assets are subject to probate?

One of the most important things to determine after someone dies is: of the assets owned by the decedent, which are subject to probate?

Only assets owned solely in the name of the decedent are subject to probate.

Assets Not Owned Solely In Decedent's Name = Not Subject to Probate

1) an asset with a joint (or more than one) owner titled on the account/deed/title

2) an asset with a designated beneficiary 

3) an asset that automatically passes to a beneficiary upon death of the owner (life estate/lady bird deed)

Immediately upon death of the owner, the above types of assets, or property, transfer to the joint owner or designated beneficiary so that the asset is not left owned solely in decedent's name.

Examples: 

Mother and daughter are both named on at checking account. Mother dies. Daughter now owns bank account on her own since Mother is dead. The bank account does not need to be reported to the probate court.

Husband has a 401(k) retirement account. Wife is named as the primary beneficiary of the 401(k). Husband dies. Since Wife is the designated beneficiary, the 401(k) passes to Wife. The 401(k) retirement accout does not need to be reported to the probate court.

Mom and Dad own real property. The deed indicates that upon Mom and Dad's death, Child will own the real property. Mom and Dad die. Child now owns real property and this property/asset does not need to be reported to the probate court.

*Think about it like this... do you need someone to have the authority to be able to transfer the property or close out the bank account after loved one dies? If so, then that asset needs to go through the probate process.

Assets Owned Solely In Decedent's Name

1) Wife has a savings account with only her name on it. Wife dies. This bank account is subject to probate.

2) Husband has a life insurance policy. Husband forgets to name a beneficiary of the policy. Husband dies. This life insurance policy is subject to probate in order to transfer it to the Husband's wife or children.

3) Husband owns a piece of real estate titled only in his name. Husband dies. This property is subject to probate in order to transfer the real estate to Husband's wife, children or other beneficiaries or to sell the property.

What is probate?

Probate is a process by which an individual is given authority by the court to administer the affairs of a decedent's (dead person's) estate (property).

Here is a summary of the basic steps for probate:

1) Someone dies leaving property owned solely in their name

2) Some else files an application or petition for probate with the county probate court

3) The probate court appoints a Personal Representative to handle the affairs of the estate

4) The Personal Representative creates an inventory of the estate assets

5) The Personal Representative pays creditors of the estate and distributes the decedent's property (this can be done at the direction of a Last Will & Testament or by law if no Will)

6) The estate is closed

There are many small steps in between depending on the people and property involved, but this gives you the gist of it.

Disclaimer

All of the information found in this blog relates to Michigan law. Other states may have similar laws and procedures but they are never the same. Please do not rely on the information found in this blog as legal advice, but rather enjoy this resource as educational in nature to begin thinking about estate planning or to point you in the right direction for probate. There may be information contained in this blog that is incorrect or incomplete. Always seek the advice of a qualified attorney when you are unsure how to legally proceed. Your reading of the information in this blog in no way creates an attorney-client relationship with me.

Who says?

I'm a Michigan attorney with an appreciation for probate law. I spent about 3 and a half years learning the ins and outs of the Michigan probate courts by reading the code and trial and error. The Institute of Continuing Legal Education and the State Bar of Michigan certified me in 2012 for Probate and Estate Planning after I completed over 80 hours of seminars and workshops covering various probate and estate planning topics. I honestly do not have all of the answers and still sometimes perform by trial and error, but I know a lot more than the average person regarding probate and want to share some of that knowledge here. People do not realize how important estate planning is but their loved ones do because they are left to handle the oftentimes mess left behind.