How to Avoid Probate in Pennsylvania: Mistakes to Avoid

Probate often incites feelings of dread, and with good reason. When an estate goes to probate, litigation can drag on for months. If the surviving heirs are highly contentious, probate may last for years. One of the most important questions clients ask a Pennsylvania estate planning lawyer is how to avoid probate. 

What is Probate? 

When a person dies, probate is the process that administers their estate. An estate is often confused with large luxury homes and an extensive financial portfolio. However, the term simply refers to any property or assets the deceased had in their name upon death. 

Why Do People Want to Avoid Probate in Pennsylvania?

When an estate goes to probate, it can be costly and time-consuming. Assets are often frozen until the estate can be settled, leaving heirs without their inheritance for several months or longer. In addition, the process can be very stressful for surviving beneficiaries.

Lives are complicated. Spouses divorce and remarry, businesses are opened with partners, and children are born and adopted. When the state decides what happens to property and assets, potential heirs may fight for what they feel entitled to and drag out the probate process even further. 

In addition, when an estate goes through probate court, the details become a matter of public record. Personal information will be revealed, like what debts are owed and how much the estate is worth. Anyone can find out about your private finances through a simple internet search. 

Settling an estate without probate may be the best way to avoid unnecessary costs, stress, conflict and maintain privacy after death. 

Can An Estate Be Settled Without Probate In PA? 

There are a few options when setting up an estate so it can be settled without probate in Pennsylvania. Since probate handles and administers assets to beneficiaries, the question becomes how best to protect and distribute property upon death.

Living Trusts

Living trusts are also called revocable living trusts. The grantor of the trust can act as both trustee and beneficiary, allowing for more control over the estate. 

In the event of death, assets held in a living trust can bypass probate. The beneficiary takes over the trust and does not need oversight by the court. A revocable living trust can be canceled at any time. 

Unfortunately, there are some drawbacks to using a living trust. Assets held in a living trust are not protected from creditors. In addition, the property and assets are still subject to income and estate taxes.

Joint Ownership of Property and Assets

When an asset is jointly owned with a survivorship right, probate can be avoided. For example, say two spouses own a home together, and one suddenly passes. Ownership automatically reverts to the surviving spouse. 

There are a few types of joint ownerships that have survivorship rights:

• Tenancy by the entirety: Tenancy by the entirety is only meant for married couples. Both spouses must own an equal share of the asset.
• Joint tenancy: Joint tenancy can involve multiple owners. As long as each person owns an equal share, assets can be transferred without probate. 

Surviving owners must have strong documentation to support their claims. However, using joint ownership as a way to divide assets can lead to other problems.

For example, joint ownership has its own set of tax issues. If the goal of avoiding probate was to reduce taxes, joint tenancy or tenancy by the entirety may not be the best solution.

Assets also fluctuate over time. If different joint ownerships are used for multiple beneficiaries, the inheritance may not be even and create a source of contention. 

Transfer-on-Death Deeds, Registration for Securities

Pennsylvania does not allow transfer-on-death deeds for real estate or vehicles. However, the state does allow registered stocks and bonds to be transferred on death. 

Payable-on-Death

Another way to avoid probate is to designate a payable-on-death for a bank account. This can include savings accounts and certificates of deposits. The beneficiary will not have any right to the money until after the death of the individual. 

How Much Does an Estate Have to Be Worth to Go to Probate In PA? 

Estates worth $50,000 or more are required to go to probate unless other arrangements have been made. Generally, land and real estate are excluded from the $50,000 total. 

A small estate with a gross value of less than $50,000 may be able to avoid probate. Probate court is an expensive and lengthy process. For a modest estate, there may not be left for surviving beneficiaries to inherit. 

An estate can petition for a direct Orphans’ Court approval and avoid the probate process altogether. There are still fees, but far less than probate court. 

What Assets Are Exempt from Probate in Pennsylvania?

Probate-exempt assets involve specific accounts and assets set up specifically to avoid probate, as discussed above. For example, any assets in a living trust or jointly owned under joint tenancy with survivorship rights are considered non-probate assets. In addition, a payable-on-death account is exempt.

Retirement accounts are also considered immune from the probate process. Some non-probate assets include the following:

• IRAs
• 401(k)s
• Life insurance proceeds
• Pension plan distributions

For one of the above assets to be exempt from probate, a beneficiary must be named. 

What Mistakes Can Lead to a Probate Dispute? 

The biggest mistake that can lead to a probate dispute is not having an estate plan. According to A National Survey of Estate Planning Utilization, 44% of adults do not have any form of an estate plan or will. 

People have various misconceptions about Pennsylvania inheritance laws. Some believe their property and assets will automatically pass to their spouse or children. Others feel they do not own enough assets to justify having an estate plan.

Even small estates can end up in probate court if the deceased wishes are not clear.   

1. Not Having a Last Will and Testament

Without a last will and testament, Pennsylvania will have to decide how your assets are administered. In addition, there are heavy costs and court fees that will be taken out of the estate before any property or possessions are given out. 

Assets to be administered in probate include:

• Investment accounts
• Bank accounts, including checking and savings
• Real estate
• Retirement accounts
• Vehicles
• Pets
• Home items
• Family heirlooms

Depending on the marital status of the deceased, assets may be distributed to spouses, children, parents, or even distant family. 

Creating a will is never easy. It forces people to consider the breadth of their assets, who they wish to leave each possession, and who they choose to leave out. Some people may prefer to leave the administering of their estate to Pennsylvania. However, the difficult decisions are left to surviving family members without a will. 

Heirs may fight over sentimental possessions, furniture, and how much of the estate they feel entitled to inherit. In blended families, members of the first family often feel entitled to more than members of the second family. As a result, when surviving relatives are forced to make difficult decisions about property division, it can lead to hurt feelings and conflict. 

2. Failing to Create a Clear Will or Estate Plan

A Last Will and Testament and estate plan must be clear, concise, and specific. Ambiguities usually result in unnecessary conflict. Wills and estate plans must also be updated periodically, especially concerning major life changes. For example:

• When children are born or adopted
• When considering who should have guardianship of underage children
• In the event of separation or divorce
• If a spouse remarries
• When the owner or partner in a business or investment venture
• If there is a dramatic change in finances
• If considering leaving a portion to a church, non-profit, or an organization outside the family

If the deceased acquires more assets or undergoes various life changes and does not periodically update their estate plan and will, surviving family members may be forced to go to probate anyway. 

3. Not Assigning Guardianship to Minor Children

Deciding who will care for minor children is a very important decision in a will or estate plan. Tragedies happen. Parents should carefully consider the guardianship of their children should something happen to both spouses. Even if the parents are not together and have their own families, guardianship should be laid out clearly in a Last Will and Testament. 

4. Failing to Provide Guidelines for Funds to be Inherited by Minor Children

If money and property are left behind to minor children, an estate plan should address how a guardian can use the assets. Some questions that should be addressed may include:

• Can a guardian use finances for the day-to-day? 
• Should a portion of the inheritance be set aside for school? 
• Does the deceased want their heirs to inherit only when they come of age? 
• Will a guardian have full access to property and assets or only a portion for support? 
• What if the guardian faces financial hardship and is unable to care for the minor children or they no longer want to be a guardian? 
• Who should be next in line? 

Speaking an estate planning attorney in Pennsylvania can help families address the best way to care for their children in the event of their untimely death. 

5. Failing to Have a Contingency in Case a Beneficiary Passes

When wills and estate plans are not kept up-to-date, they may not meet the needs of the deceased and their family. Through the years, beneficiaries may pass. 

For example, suppose a will is made shortly after marriage, with each spouse being the other’s beneficiary. Over the decades, one spouse passes. If the surviving spouse has not updated their estate plan, they may pass without any clear beneficiaries. 

Surviving children and other heirs may find themselves in probate and left to the state’s division of property. If neither spouse had children, their siblings may be forced to fight over property and possessions.

What Estate Planning Documents Need a Notary Public?

Estate planning documents are legally enforceable in court. Most of the paperwork will need to be notarized. However, having the bulk of the estate plan notarized may be in a person’s best interests. 

A notary certifies that deeds, mortgages, and other contracts are legitimate and legally binding. Some documents to consider having notarized include:

• Custody and guardianship agreements for minor children and pets
• Powers of attorney, including medical and financial power of attorney documents
• Executorships
• Living, revocable, and irrevocable trusts
• The Last Will and Testament 

Speak to an estate planning attorney to determine which documents are best notarized.

Contact a Pennsylvania Estate Planning Lawyer Today

When an estate plan is detailed and set up properly, probate can be avoided. In addition, a solid estate plan can also be used to reduce taxes, fees, and other costs. Consult with a Probate attorney in Pennsylvania today to discuss the details of your goals.