Elder Law Report

Avoid Probate Nightmares with Expert Tips

Greg McIntyre, J.D., M.B.A.

Avoid the probate nightmare and protect your assets! Discover how you can shield your heirs from the costly and time-consuming probate process in this riveting episode of the Elder Law Report. Attorneys Brendan Begley and Jordan Bentley reveal why probate can be a breeding ground for creditor claims and disputes, dragging out asset distribution for years. Learn how to anticipate and mitigate will challenges, ensuring a smoother transition for your loved ones.

We break down effective strategies to bypass probate, from property ownership nuances to alternative asset management methods. Whether it's naming beneficiaries, employing ladybird deeds, or setting up trusts, we cover all the bases to help you maintain control over your assets. Understand the implications of life events like divorce or bankruptcy on property recipients and how Medicaid look-back periods can affect long-term care benefits. Equip yourself with the knowledge to make informed decisions and preserve your legacy. For personalized advice, visit mcelderlaw.com for a free consultation with our experienced attorneys.

Speaker 1:

Hello, attorney Brendan Begley. Here for the Elder Law Report, I'm joined by Attorney Jordan Bentley. Say hi, jordan. How are you Brendan? Hello, everyone of the risks that probate faces to our money and property and I mean, quite honestly, to our sanity for going through the process as an heir, and also it's an important topic because of the different ways that we can do it, whether it is right or wrong. So let's talk about first why you'd want to avoid probate, jordan. Why do we encourage our clients to avoid the probate process?

Speaker 2:

Yeah, well, I think you kind of hinted at this In addition to being frustrating and time consuming and if you choose not to do it yourself, right, expensive, because you're going to hire a professional and attorney to do it for you or help you through it. So we got time consuming, frustrating, expensive. In addition to that, it's the only opportunity creditors have to come back and get repaid for money that you owe them. After you pass away, any things, any assets that you own when you pass away will become property of your estate and there's a period of time during probate where that estate property could be subject to creditors and debts that you have. So you want to avoid that process, to avoid creditors getting paid back.

Speaker 1:

Right. So, number one, you know you got probate. It's a long, difficult, expensive process. It takes anywhere from two months or, I'm sorry, six months to two years to go through that process. Two months would be great yeah, two months would be amazing, right, and it can can be. It can be expensive. You have the probate costs, you have possible attorney's fees, you have filing fees, things like that. You also have what you mentioned a venue for creditors to come make a claim against the estate.

Speaker 1:

North Carolina is what's called a limited recovery state, which means that if a creditor wants to come after assets of the estate, they're limited to going after those assets that are either going through probate or subject to the probate process. So avoiding probate in the correct way will allow you to avoid creditors making a claim against your hard-earned money and property that you want to leave behind to the next generation or to your spouse. So, that being said, another thing about probate. Another risk about probate that people worry a lot about, and rightly so, is can someone challenge this estate plan that I put in place? And maybe I'm just in that mode, thinking that way too, because I've been dealing with a lot of litigation, but if you have a probate estate a lot of litigation. But you know, if you have a probate estate, then that is a venue for any heir or any potential heir or anyone that has a pecuniary interest in the estate, to come in and make a challenge to your estate plan and that can hold up the probate process, the division of the estate for years.

Speaker 1:

Litigation can last for years. So if you have a estranged you know loved one who you left out of the will, if you have an individual who thinks they should have gotten more than what they got, if you have an individual who thinks they should have gotten something but got nothing, then there's a potential for them to challenge that will and to hold up the probate process. And so I get the question all the time well, you know, can someone challenge this? And the answer I say is well, yeah, they can, anyone can. Now, whether or not the win is another thing altogether. But the danger about probate is that a will challenge will freeze the probate process. So even if they don't win, I mean that probate or that will caveat, that will challenge, will last at minimum six months, maybe even beyond that. So if probate's already six months to two years, you hold it up for a year or two years, then we're looking at like a three, four or five year probate process.

Speaker 2:

And that holdup that you're talking about. You're not just talking about waiting. You're talking about court and negotiations and mediations and things that are that cost money if you have an attorney representing you.

Speaker 1:

That's right. Yeah, I mean depositions, discovery, you know. I mean, if you're a propounder of the will, meaning that you think the will is valid, right, You're one of the heirs that thinks the will is valid you might be subject to another attorney sitting there asking you a bunch of questions, deposing you, putting you on the stand, that sort of thing. So you know time, money and emotions. People tend to not like litigation. I like it because it's my job, but you know the people that I represent tend to just want to get it. It's a system that's not set up to be enjoyable. It's a system that's set up to kind of drain, you know, the energy from the parties. That being said, when litigation is necessary, it's the right way to go, regardless of the risks. But we want to avoid it if at all possible for our heirs and that's why we want another reason why we want to avoid Right, we're not talking about avoiding and this is kind of an aside but we're not talking about avoiding litigation when it's necessary.

Speaker 2:

We're talking about setting it up so that it's not necessary for other people.

Speaker 1:

That's exactly right. Yes, I mean you don't want to create a situation where you invite people to you know file a litigation action.

Speaker 2:

And that's something I hear all the time. People sit down and they'll say, in addition to, can this be challenged? They'll say how do I make sure it can't be? How do I make sure this is easy for my son? My mom's probate was very difficult, or dealing with my dad's property If he passed away. It was hard on the family. How do I make this simple for my wife and kids? Or how do I make it simple for my grandchildren and probate is not simple?

Speaker 1:

It's not simple, and we would love to for it to be as simple as possible, and so the best way to do it is to avoid probate altogether. So here's the thing you may hear people say hey, you need to avoid probate. A lot of people have an understanding that they don't want there to be some type of long drug out process after a loved one dies, so they attempt to avoid probate and they may do it wrong. So what are some ways that someone could you know, in good faith, try to avoid probate but do so the wrong way?

Speaker 2:

Well, I think the one that came to mind while you were talking there, and I don't even know if it's it might be obvious to people you know listening to this, and to you it certainly probably is. But people even know if it's. It might be obvious to people you know listening to this, and to you it certainly probably is. But uh, people will sit down and say I have a will. I mean, what do?

Speaker 1:

I need to worry about probate for Right.

Speaker 2:

I have a will. I'm giving everything to my daughters and my will. No probate, that should be easy, right and that's obviously wrong. Um, a will is is literally just a guide or your instructions for, for your executor, for your people, through probate and what you're saying is the will is not going to keep you out of probate. No. Filing that will is one of the first steps of the probate process.

Speaker 1:

Right.

Speaker 2:

So having a will, while it's necessary and while it's a good thing to have, is not what you need to avoid probate. So that'd be the first and biggest misconception, I think.

Speaker 1:

Yes, yes, absolutely. I'm glad you mentioned that because a lot of people think, hey, I have a will, I'm going to go, no probate necessary. But a will is just guide through the probate process as you alluded to, and really, if all you have is the will, then you're basically guaranteed to go through the probate process.

Speaker 2:

Yeah, you're not avoiding it, You're setting people up to do it.

Speaker 1:

Yeah. So the other one that I see that is a main, you know, failure in an attempt to avoid probate, but you're basically out of the frying pan into the fire is transferring assets during your life to a loved one, like a child, right. So gifting assets. So you know, people ask me all the time well, why might gifting be an issue? You know, if I'm trying to avoid probate, that really accomplishes that goal. So why can't I give my home to my children during my life and it's in their name when I die? So no probate Right. So it seems like problem solved. But there are some issues with just transferring ownership to the property, right. Like you know, if you give your house to your kid and they get divorced, get sued, go bankrupt or pass away, there goes the house.

Speaker 2:

Certainly so, while I think you're talking about just outright transferring stuff, getting it out of your name, giving it to people, changing the name on the account, you know, changing the deed on the property, like you're saying, you are giving up control of that stuff while you're alive. So, while you might be avoiding probate, you're also giving up control, giving up your right to do other things with that property which could be a problem for your estate plan. But also, just practically speaking, I don't want to take away your control of your stuff while you're alive and I think there's better ways to avoid probate than to do that.

Speaker 1:

That's right. That's right. And if your loved one, whoever you give it to has a spouse and it's real property, you know the spouse has to sign off on anything they do. So you might be saying, hey, you know, I gave it to my daughter or my son for safekeeping. They're going to do exactly what I want. They'll sell it If I want. They'll, you know, get the equity out If I want. They'll give it back to me if if I want. But you know, if they have a spouse, a spouse has to agree to and that's that's where it gets dangerous. The other thing is that you have a look-back period for Medicaid. We haven't really talked about Medicaid throughout this whole thing.

Speaker 2:

I heard you hinting at that. I didn't know if you wanted to jump down the Medicaid rabbit hole. But yeah, if you're planning for some type of benefit to pay for long-term care, just getting rid of assets, getting them out of your name while would avoid probate yes, is potentially detrimental to some type of benefits planning.

Speaker 1:

Right, exactly Because you know if you need to pay for long-term care. There's a couple ways to do it. You know it's very expensive and one of the main ways is to qualify for a benefit to pay for the care. When it comes to long-term care Medicaid, you can own assets that still qualify, but the problem that people have is that they want to get assets out of their name to avoid the Medicaid clawback or Medicaid estate recovery. One of the best ways to avoid the Medicaid estate recovery is to just avoid probate. You don't need to get the assets out of your name, so you know what a lot of people end up doing is they give away an asset, and that invokes the three to five year look back period for medicaid where medicaid basically says if you give a gift within a certain period of time three years for assisted living level medicaid, five years for skilled nursing care we're going to penalize you for that.

Speaker 1:

We're not going to approve the payment for your care if you've given away an asset within that period of time and you try to apply for Medicaid.

Speaker 2:

So in their mind they're thinking you should have kept it, you should have sold that asset or use that money to pay for your care. So they're going to. Yeah, exactly, I just wanted to explain why you get that penalty.

Speaker 1:

Exactly, and so you know doing that is a real roll of dice. Okay, so we don't want to do that and then risk needing care within that look back period and not being able to get the care that we need paid for it. So giving away the property not a good solution. So what is a good solution? How can we make sure we keep the property in somebody's name, under their control for the rest of their life and still avoid probate with, let's say, their home?

Speaker 2:

So with most of your assets that I'm going to answer that I just think before I should say with most of your assets that I'm going to answer that I just think before I should say with most of your assets, right, things other than your home checking accounts, savings accounts, life insurance, things like that you can name a beneficiary on them, right, and it passes to that person automatically. You can do a similar setup with your home, with any property. You can do something called a ladybird deed or an enhanced life estate deed where you're naming someone as a remainderman or a future interest holder, basically a beneficiary on that property, and they're going to, you know, acquire it or own it automatically when you pass away similar to how a beneficiary would receive a checking account or something like that.

Speaker 1:

Exactly, there's also. You know you can do a trust. Anything that's in a trust avoids probate.

Speaker 2:

But I like to say that you, you pass away, you know you can do a trust. Anything that's in a trust avoids probate. But I like to say that you pass away, You're going to die. Your stuff has to go through, you know, be owned by your estate, go through probate, but your trust doesn't die Now. Your trust owns will just be owned by your trust.

Speaker 1:

Exactly It'll be owned by your trust passed to whomever you want to leave it to upon your death automatically, which is a nice thing. Whatever's in the trust avoids probate. And then with the home, specifically, a good way to avoid the probate process with the home, while keeping the home in your name and under your control for the rest of your life, is what we call the ladybird deed or the enhanced life estate deed, and what that does is it names. It allows you to name a beneficiary or multiple beneficiaries to the property. They don't own the property. They're not an owner of the property where you have to get their consent to sell it or they have any right, title or interest to it until you pass away, and then it passes to them automatically outside probate and outside the reach of any creditors.

Speaker 1:

So that's a really good way to set up the home or other real property. So you know there's there's a number of ways that you can do this. We can really delve into trust, which you know I don't think we have the time to do today. I will probably do a follow up elder law report regarding trust and the benefits of doing trust and how to you with today is the importance of avoiding the risk of probate and the fact that there's tools out there to do that. And also, please, if you have a will, you're not avoiding probate. And please know that if you have assets, don't just give them away. It's not going to help anybody.

Speaker 2:

There's a lot of different ways to do it, but the key is that you figure out what way works for you and we're able to help do that. And avoiding probate, like Brenton said, is the key here. You want to avoid that process with as many of your assets or all of them if you can.

Speaker 1:

That's right. Well, thank you, Jordan. It's been a productive conversation and hopefully helpful as an explanation of why we encourage our clients to avoid probate. If you have questions about probate trust anything that we do, which is estate planning and elder law you can visit our website, mcelderlawcom, and on that website you can schedule your free consultation to talk to an experienced attorney regarding what issues you may have and any possible solutions, and also to determine whether or not you need certain documents that we discussed in these elder law reports, like powers of attorney, wills, trust, lady birdies, that sort of thing. So, again, if you'd like to schedule your free consultation, go to wwwmcelderlawcom. Thank you, Jordan. Thank you, Brenton, See you.