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Is it wise to avoid probate?

For most people the answer is a resounding "yes", though not for the most commonly assumed reason.  Too many times for me to count, I have had clients tell me that they want to avoid probate because by doing so they will avoid estate taxes.  This is not true.  Probate and estate taxes are not linked.

Among the most important reasons to avoid probate are to minimize administrative expenses and to provide privacy.  In my experience the bureaucratic nature of probate administration typically adds thousands of dollars of costs to the process of identifying, collecting, and valuing a decedent's assets, paying allowable bills and taxes, and making distributions to heirs and beneficiaries.  Further, since all probate assets must be valued in court filings, those filings are available for public inspection.  In Cincinnati, Ohio, where a large part of my legal practice is located, every single court document is available on-line for everyone in the world to read.  So, with a few keystrokes,  everyone, from nosy neighbors to scamming charlatans, can know what a person's probate estate is comprised of, what it is worth, and the nature and value of assets distributed to heirs and beneficiaries.  This makes me very uncomfortable.

Probate can be avoided by various means.  I am a big fan of using trusts, because trusts have the flexibility to overcome a multitude of unforeseen events.  Assets that are titled in trusts avoid probate.  Other ways to avoid probate are to make bank accounts payable on death (POD) to one or more designated beneficiaries and making brokerage accounts, automobiles, and real estate (Ohio only) transferrable on death (TOD) to one or more designated beneficiaries.  I don't recommend that bank accounts be held jointly with children except for checking accounts with balances limited to an amount necessary to pay monthly expenses.   IRAs and other retirement plans should have beneficiary designations, as should life insurance policies.

It is necessary to regularly review trusts, beneficiary designations, and the status of joint accounts to assure that they achieve your estate planning goals.

Steve Hoffsis

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