When a person dies, we know that their estates will have to be distributed to their beneficiaries, according to what they provided for in their will or other estate planning documents. But this is not the only agenda of probate. Before the assets can be divided to the beneficiaries, the unsecured debts of the deceased will have to be settled first.
When an estate is brought to court, notices of the death are published and the creditors of the deceased are called to court to make their claim. Anything that goes through probate is going to be subject to creditors.
How to Avoid the Creditors
One way that this can be avoided is by not going to probate at all. Without the public court process, there will be no notice of the death of the debtor. The creditors are not alerted that their debtor has died and there are assets for them to come and get.
However, when they learn about the death, they can claim what is due to them up to 1 year after the death. But they will have to open a probate on their own and make their claim. Many creditors don’t see that as worth the expenses and inconvenience so they no longer go after the debt. Not going to probate, therefore, can help an estate avoid creditors or otherwise give them more time to settle the debts.
How to Avoid Probate
There are some estate plans or strategies that can help a person avoid probate. One of the most common is a revocable trust where the assets are put into a family entity and immediately transferred to the trust beneficiaries. This is a process that doesn’t need to be brought to court to be executed.
Other strategies are through transfer on death deeds for homes or simply adding pay-on-death beneficiary designations on bank accounts, insurance policies, etc. These are automatic transfers that do not need probate.
Avoiding probate can help a debtor avoid the probate repo man because no notice is given to the creditors to come and make their claim. Although it doesn’t hinder them from coming and taking what they are due, they would have to do a little more work in order to claim it.