If there's one thing we talk about endlessly in all of our articles, it's the probate court process and why you want to avoid it at all costs. Even if you don't think that you have anything of value or don't quite know what it means to have "an estate," the one thing you don't want to do is put your loved ones or your precious assets through the probate process.

Fortunately, if you handle your estate planning in Huntsville, AL, you won't have to worry about probate court. You also won't have to worry about your loved ones going without financial support or handling the settling of your estate on their own. 

Consider this your straightforward guide to avoiding probate in Alabama. Trust us, you'll want to read every word!

What Exactly Is Probate and Why Do I Want to Avoid it?

Probate court refers to your local (county) judicial system. This system, in particular, handles the settling of an estate, conservatorships, guardianships, and deciding whether someone should be legally committed to an institution for their benefit if they have a psychiatric disability. So you could say it's a court designed for the welfare of the people, even if the outcome doesn't always seem that way.

Regarding settling your estate, the role of the probate court is to ensure that the deceased individual's estate is thoroughly evaluated, their debts paid, and any remaining assets distributed to the appropriate beneficiaries. At a glance, it's a legal process designed to manage deceased individuals' assets and liabilities left behind. However, it's actually a multifaceted process that can become overwhelmingly distressing if your estate is a mess — as in no wills or trusts, among other things.

The probate process becomes active once an individual files a petition for probate on behalf of the deceased. If you have a last will, that person is usually the executor named in the will. Otherwise, it's usually a family member, in which case, the court will select someone they deem responsible for acting as an executor on your behalf. 

The executor (also referred to as the administrator) essentially takes on the responsibility of distributing your assets and managing your debts. If you have a will, your executor will at least have proper instructions as to how you want your assets managed and distributed. This will help the probate process run much smoother and quicker, whereas if you die intestate, the process becomes more drawn out and potentially messy.

It may sound like the probate court process is clear-cut and simple, but we can assure you that there are plenty of reasons to avoid it at all costs. 

Here's why:

It Makes Your Estate a Matter of Public Record

Once you pass on and probate is petitioned for, your estate becomes a matter of public record. At least anything you haven't protected in a trust (which we'll talk about later). This means that anyone can access the contents of your estate to learn how much your estate is worth, what debts you have, what's in your will, and even the names of your immediate beneficiaries (such as your spouse and children). 

What's more, when certain people find out you've passed on, they may come for your assets. This would include creditors and liens and estranged family members who feel entitled to money or particular possessions. 

It should also be noted that while last wills are usually solid documents, they're not always concrete. Anyone with just cause can contest your last wishes. They may be unsuccessful in their efforts, but something like this will only prolong the probate process costing your family more money and prolonging their grief.

It Takes a Long Time to Complete

The probate process in Alabama can take anywhere from six to nine months. In many cases, more, but rarely less (except in the case of small estate probate court). It all depends on the size of your estate and whether or not you have an effective estate plan in place.

Even at the minimum, six months is a long time. This is especially true if your family is dependent on the financial support that comes from your estate. 

It's Expensive

The probate process isn't cheap. There are filing fees, administration fees, and other court fees. It's also highly recommended that you hire an attorney, which can also be costly. 

You'll also need to consider any debts you leave behind, as settling those require money from your estate and can sometimes be transferred over to your spouse if you're not careful.

It's Not Always Fair

As mentioned above, once your estate is probated, anyone can come out of the woodwork and lay a claim on the assets that should go to your immediate family. Moreover, if you die intestate, your estate will become subject to the Alabama Intestate Succession laws. 

While these laws (also called the Alabama Inheritance laws) are designed to distribute assets appropriately to protect families, it doesn't always work out in their best interest. Who gets what ultimately depends on your marital status, whether you have living children or other close relatives. 

It becomes especially complicated if you have an ex-spouse whose name is still on credible documents, like the deed to your house. Or if you have children that aren't biologically related to your new spouse. 

It's also important to remember that if you and your spouse pass on unexpectedly and have minor children but no documentation of a named guardian, it will be up to the probate court to select a guardian. The Alabama judicial system believes in keeping families together as much as possible and will undoubtedly look out for your children's best interest. However, they may be unable to find a willing or able family member to take on the responsibility of raising young children.

When there are no family members deemed fit to take on guardianship over minor children, they become the custody of the state. This means they'll end up in foster care, where siblings can get separated and potentially remain within the system until they turn 18 and age. 

How Proper Estate Planning Can Help You Avoid Probate in Alabama

As you can see from above, the probate process can be a bit of a nightmare. In addition, it's incredibly stressful if there are young children to account for. However, there are several things you can do to ensure that your assets — and family — get to bypass the probate process with ease.

Here's what you can do:

Have a "Small Estate" 

A small estate is an estate that's typically valued at $25,000, Give or take. But, of course, this number increases with inflation, and as of 2021, the state of Alabama allowed for a maximum of $30,608 to be declared as a small estate.

As mentioned earlier, having a small estate can work in your favor as the state of Alabama has a summary distribution process. Summary distribution is essentially a simplified version of probate court during which the family can file an affidavit to declare the estate's size. In addition to this declaration, the family must also petition the county probate court to move forward with the simplified version. The court may grant permission to move forward with the distribution of assets without the usual formalities. 

Small estate probate generally takes two months to complete. However, there are associated costs such as filing fees, debt repayment, and hiring a Huntsville attorney if needed. While this method may not allow your loved ones to avoid probate altogether, it at least expedites the process and does not require a written will (although a written will is always recommended no matter what).

Create Trusts for Your Assets

People tend to have the same common misconception about trusts as they do with estate planning in general. However, you don't have to be wealthy to create trusts. They're incredibly beneficial in three ways: Protecting your assets, lowering your estate taxes, and ensuring that your beneficiaries receive what's meant for them.

It should be noted that Alabama doesn't levy a state tax on estates. However, the federal government still does, and the amount will depend entirely on the total value of your estate at the time of your passing. 

As far as the actual trusts are concerned, there are several kinds of trusts you can create. However, living trusts are among the most popular. A living trust is a legal document that you can draw up to name specific assets for specific beneficiaries. They come in two forms, revocable and irrevocable, and they guarantee the protection and privacy of your assets as soon as you sign and officialize the document. 

You're essentially relinquishing ownership over assets and giving legal ownership to the named beneficiaries by funneling assets into trusts. Since they no longer belong to you, they don't count towards your estate, which lowers its overall value and lowers any federal taxes owed. This also means that creditors and other liens cannot come after those assets, nor can anyone contest the trust. 

Another benefit of creating trust is that you can choose the date for when the assets will be released. Choosing a milestone for trust release dates, such as college graduation, marriage, children, or a specific birthday, is common.

There's virtually no limit to what you can put into a trust or how many you can create. Your Huntsville attorney will help you determine the type of trust best suits your needs.

Name Beneficiaries on Your Accounts

Most people don't know this, but you can name beneficiaries for your accounts. This would include retirement accounts, investment accounts, savings accounts, checking accounts, etc. This is also referred to as making accounts transferable upon death (TOD) and payable upon death (POD). (TODs usually involve retirement and investment accounts, while PODs involve bank and insurance accounts).

Typically, you would name a beneficiary upon opening these accounts, whether it be with the bank, with the insurance company, or during the onboarding process of your job. However, if you skipped this step (like most people do), you can simply request the designated form to fill out from whichever institution or from your job. 

Keep in mind that if you are married, some of these accounts will automatically be under the partial ownership of your spouse. However, you'll still want to review your accounts to ensure that the proceeds will be immediately distributed to your beneficiaries rather than going through probate.

You'll also want to remember that while TODs and PODs allow you to bypass the probate process, they do not bypass your debts. Additionally, if you name a minor beneficiary and pass on before they reach their legal age, these accounts will have to go through probate.

Therefore, TODs and PODs are your best option in ensuring that your spouse or adult children receive immediate funds upon your passing.

Hold Property Jointly

For most people, real estate is the most valuable asset to have in an estate — which is why you want to protect it at all costs. An excellent way to keep your home or even vacation properties out of probate's hands is by holding it jointly with a spouse or a close family member. 

Owning property jointly will allow the property to directly pass to whomever you own it with, regardless of your marital status. It doesn't matter how much it's worth either. It'll bypass probate entirely and become fully and legally the surviving persons. 

However, this partial ownership will have to be clearly designated, so you'll need to speak with your Huntsville attorney to understand your rights as a property owner.

Give Away Assets While You're Still Alive

While this won't work for everyone, one thing you can do to protect certain assets while lowering the value of your estate is by simply giving them away while you're still alive. This option generally works if you have assets that you don't need to be put into a trust but still want to keep out of the public eye and out of probate court. After all, the more assets you have left to comb through, the longer and more expensive probate court will be.

So, consider passing on some assets early as gifts or just because. It'll also save you time and money in regards to creating trusts for things that don't necessarily require all the formalities of a trust.

Other Things to Understand About Estate Planning

Avoiding probate isn't your only concern when it comes to estate planning in Huntsville, AL. While your Huntsville attorney will keep your best interest in mind regarding everything we've talked about in this article, it's critical to remember the following:

You Need a Will No Matter What

Sometimes no matter what you do, probate just isn't 100% avoidable. You need to have a last will to cover any assets left out of trusts and document how your executor or family wants to proceed with any debts. Not to mention, it's a good idea to leave instructions for your funeral arrangements as well as the funds to cover those arrangements if needed. 

Wills may have to go through probate, but it's better than leaving your loved ones without instructions and any additional assets in the state's hands.  

Don't Forget to Name a Guardian for Minor Children

If you have minor children, trusts are not enough. You need to plan for the scary "what if?" scenario to ensure they end up in capable and loving hands should something happen to you and your spouse.

Guardianship for minor children is typically written into wills, which is another reason why you need a last will no matter what. There's a lot to understand when it comes to figuring out potential guardianship for your children, as it's a big decision. So, don't get so caught up in avoiding probate that you also forget to plan for your children's future. 

Update Your Estate Plan in Time

Things change, and assets accumulate. That's why you'll want to meet with your Huntsville attorney every three to five years — or after significant life events — to review your estate plan and make the appropriate changes. 

Keep in mind that anything that's not put into a trust, made transferable, or designated in a will becomes a matter of the state's discretion. It also becomes a part of your estate's overall value.

Generally speaking, there's a lot more to estate planning than just avoiding probate. However, you'll want to do everything you can to reduce the burden that will be left on your loved ones should you pass on. Fortunately, your Huntsville attorney will ensure that no stone is left unturned so you can have peace of mind in your everyday life.

Contact us today to schedule a consultation with Sarah S. Shepard or another experienced Huntsville attorney to help you with your estate plan.