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Want To Make Sure Your Estate Stays Out Of Probate In Alabama? These 5 Steps Are The Key!

Jun 11, 2024 | Probate

If there is one thing we are sure about as estate planning lawyers, it’s that it is in your best interests – as well as your family’s – to do everything you can to keep your estate out of probate. This complicated, court-supervised process has the potential to create so many problems that those you love most will have to solve without you, and right in the midst of their mourning your loss.

The good news is that there are legal tools and protections available to you to ensure that your assets stay out of probate, that you remain in control of what happens to your money, and that your loved ones are able to obtain their inheritances in a timely manner. The bad news is that most people don’t take advantage of these tools because they fall victim to common myths such as that estate planning is only for the wealthy or for the elderly, or that working with an attorney is too much of an undertaking.

We would like to set the record straight: anyone with money and property can (and should!) begin the estate planning process at any time, and when you have the right legal team on your side, the process will leave you feeling confident, not overwhelmed!

In this blog, we’ll divulge the 5 keys to safeguarding your estate and keeping it out of probate.

What Does The Probate Process Look Like In Alabama? (And Why Is It Good To Avoid It?)

In Alabama, the probate process starts when someone, usually a family member or the executor named in the will, files a petition with the probate court in the county where the person who passed away lived. If there’s a will, it’s submitted to the court for validation. If there’s no will, the estate is considered intestate, and Alabama’s laws determine how the assets are divided.

Once probate is underway, the court appoints an executor or administrator to handle the estate. This person gathers all the deceased’s assets, pays off any debts and taxes, and then distributes what’s left to the rightful heirs or beneficiaries, either according to the will or state law. The executor also needs to provide the court with a detailed inventory of the estate’s assets and notify any creditors, giving them a chance to make claims against the estate.

After settling any debts and expenses, the executor distributes the remaining assets. They’ll also file various documents with the court, including a final accounting of the estate. If there are any disputes, like someone contesting the will, the probate court steps in to resolve them. The process wraps up once the court is satisfied that everything has been handled correctly, and they issue an order to close the estate.

In Alabama, this whole process can take several months to over a year, depending on how complicated the estate is and if there are any legal challenges. Similarly, the longer it takes and the more complicated it is, the more you can expect probate to cost to resolve. Even though these expenses are paid for out of the estate, there is potential for the overall amount to be impacted, and therefore the amount intended for heirs.

Here’s how you can plan to avoid your estate being subject to probate:

Step #1: Create A Trust.

Trusts are financial entities to which you can transfer your assets to be managed for the benefit of your beneficiaries. There are many different kinds that serve various purposes, making it easy to customize and tailor to meet your individual needs and goals. Assets “owned” by a trust are able to bypass the probate process and transfer nearly automatically to your heirs, according to terms you set forth.

Additionally, trusts can benefit you during your lifetime, too, not just after you pass. They offer stronger protection for your assets, opportunities to minimize federal and estate taxes, and a stronger ability to control how your wealth is distributed.

Step #2: Utilize Joint Ownership With Right Of Survivorship. 

Property owned jointly with another person that includes the “right of survivorship” will automatically pass to the surviving owner when the other dies, meaning probate is not necessary to transfer the property. Joint tenancy is the form of joint ownership recognized in Alabama, and is typically utilized by couples (both married and not) when they acquire real estate, vehicles, bank accounts, or other valuable property together. However, joint tenancy typically signified that each owner owns an equal share of the property.

Step #3: Utilize Payable-On-Death (POD) And Transfer-On-Death (TOD) Designations. 

These are two more tools that you can take advantage of to avoid probate. POD and TOD designations allow you to name a beneficiary who can inherit a specific asset following your death. Neither of these options give that individual rights to the asset(s) during your lifetime, which is the major distinction between them and joint tenancy.

It is most common for POD and TOD designations to be used for bank accounts and securities portfolios, but unlike some states, Alabama does not allow TOD designations for deeds or vehicles.

Neither of these are automatic transfers, and your beneficiary will still have to make a request to have the assets transferred into their name to the necessary institutions.

Step #4: Designate Beneficiaries. 

Life insurance and retirement accounts, including 401(k)s, annuities, and IRAs, all have designated beneficiaries within the documents, meaning those funds can pass directly to your beneficiaries without having to go through probate.

Step #5: Gift Your Money And Property To Loved Ones.

Giving financial gifts to your loved ones before you pass is probably the most simple way to keep those assets out of probate, and luckily, there is no gift tax in Alabama! There is, however, a federal gift tax for amounts greater than $18,000. But that still gives you a lot of room to work with.

Let The Ladd Firm Navigate You Through The Steps Of Avoiding Probate Effectively!

Our attorneys know the Alabama laws backwards and forwards, so you can trust us to accomplish your goals! We take the time to get to know you and your unique financial situation, so we can strategize the most efficient estate planning tools on your behalf. We know you’ve worked tirelessly to build your wealth, and we don’t take that responsibility lightly. Call today to book your free phone consultation with one of our attorneys and discover your options!

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