When you create or update your estate plan, you likely focus on how your assets will be distributed after you pass away. While this is an essential part of any estate plan, a comprehensive plan often incorporates other objectives to protect you, your estate, and your loved ones. Probate avoidance, for example, is one common goal because, while serving necessary functions, probate can be time-consuming, expensive, and invasive. Fortunately, there are strategies you can employ to minimize or eliminate the need for probate. To help you get started, the attorneys at Wilcox Attorneys, PA offer some tips for avoiding probate in Arkansas.
What Is Probate?
Probate is the court-supervised legal process that occurs after a person’s death, during which the decedent’s assets are identified, inventoried, and valued. The court oversees the payment of valid debts and taxes, and the remaining assets are distributed to the decedent’s beneficiaries or heirs. Creditors are given an opportunity to submit claims against the estate, and interested parties may challenge the validity of a submitted Last Will and Testament. While probate ensures debts are settled and assets are properly distributed, it can also be lengthy, costly, and expose your private financial matters to the public. For these reasons, many individuals seek to avoid probate as part of their estate planning. Common estate planning tools and strategies used to help avoid probate include:
- Using a Trust to Manage and Distribute Assets: A revocable living trust is one of the most reliable tools for avoiding probate. When you establish a trust, you transfer ownership of your assets to the trust itself. As the Trustee, you maintain control over the trust and its assets during your lifetime. After your death, the successor Trustee you designate will step in to manage and distribute the trust assets in accordance with your instructions. Because the trust technically owns the assets, they are not part of your probate estate. This allows the assets to be distributed quickly, privately, and without court supervision. A revocable living trust also provides flexibility, as you can modify or revoke it during your lifetime.
- Holding Property as Joint Tenants with Right of Survivorship: Joint ownership with right of survivorship is another effective way to bypass probate. When you hold property jointly in this manner, your interest in the property automatically transfers to the surviving joint owner(s) upon your death. No probate is required for this transfer to take place. This approach is commonly used for real estate, but it can also be applied to other types of property, such as bank accounts.
- Naming Beneficiaries for Financial Accounts: Certain financial accounts can pass directly to named beneficiaries through designations like Payable-on-Death (POD) and Transfer-on-Death (TOD). These designations can be added to bank accounts, retirement accounts, and investment accounts. Upon your passing, the account will transfer directly to the designated beneficiary, bypassing probate entirely. Unlike joint ownership, naming a POD or TOD beneficiary does not grant them any ownership rights while you are alive.
- Reducing Your Estate Through Lifetime Gifting: Another way to avoid probate is to decrease the size of your estate by gifting assets while you are alive. The annual gift tax exclusion for 2024 allows you to give up to $18,000 (increasing to $19,000 for 2025) per recipient to as many individuals as you like, without those gifts being subject to federal gift or estate taxes. By transferring assets to your loved ones during your lifetime, you can reduce the overall value of your estate, which may eliminate the need for probate.
- Qualifying for Arkansas’s Small Estate Procedures: Arkansas offers simplified probate procedures for estates with a total value under $100,000 as of 2024. If your estate falls below this threshold, your heirs may be able to avoid formal probate altogether by using an affidavit procedure or other simplified methods.
Can We Help You with Probate Avoidance in Arkansas?
For additional information, please join us for a FREE webinar. If you are ready to incorporate probate avoidance strategies into your Arkansas estate plan, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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