You may have been told that avoiding probate should be the number one priority of your estate plan. Whether it is a top priority or not, there are several things you need to know about the Kentucky probate process in order to have any chance at avoiding it. Probate avoidance can be a goal of estate planning if you do it the right way.
The purpose of the Kentucky probate process
The estate of the deceased must go through probate so that the property can finally be transferred to the intended heirs and beneficiaries. The probate court will also ensure that creditors and taxes are paid before inheritances are distributed. Probate is basically considered the last resort for property that has not been transferred through a trust or some other estate planning tool. Once the estate has been administered, the probate court will enter a final order for distribution.
Using Living Trusts to avoid the Kentucky probate process
In Kentucky, living trusts can be used to avoid probate for essentially any asset you own. That would include real estate, bank accounts, vehicles, and so on. You need to create a trust document that names someone to serve as successor trustee, the one to take over as trustee after your death. You must also transfer ownership of the trust property to yourself as the trustee. Then the property is controlled by the terms of the trust and will be transferred upon your death to your named trust beneficiaries without the need for the Kentucky probate process.
Joint ownership can help avoid probate
When property is jointly owned with right of survivorship, the surviving owner will become the sole owner automatically when the other owner dies. The probate court is not required to transfer the jointly-owned property, so probate is avoided. Each state has its own types of joint ownership, recognized by state law. In Kentucky, the two forms of joint ownership allowed are joint tenancy and tenancy by the entirety.
Property owned in joint tenancy automatically passes to the surviving owners when one of the joint owners dies, without the need for probate. In Kentucky, each owner, called a joint tenant, must own an equal share. Tenancy by the Entirety is like joint tenancy but is allowed only for married couples in Kentucky. In Kentucky, tenancy by the entirety is allowed for real estate only.
Payable-on-death designations for bank accounts
Kentucky allows residents to add a “payable-on-death” (POD) designation to bank accounts or certificates of deposit. This type of account allows you to retain control over your funds. Your POD beneficiary has no rights to the money, and you can spend it in any way you like during your lifetime. Then, at your death, the beneficiary can claim any remaining funds from the bank, without probate court proceedings.
Kentucky lets you register stocks and bonds in transfer-on-death form. If you register an account this way, the beneficiary you name will inherit the account automatically at your death. No probate court proceedings will be necessary. Kentucky does not allow real estate to be transferred with transfer-on-death deeds or registration of vehicles.
Simplified probate procedures
Even if you don’t do any planning to avoid probate, your estate may qualify for Kentucky’s simplified “small estate” probate procedures. These shortcut procedures for “small estates” make it easier for survivors to transfer property left by someone who has died. To use the simplified probate process, a personal representative files a written request with the local probate court asking for permission to use the process. The court may authorize the executor to distribute the assets without having to jump through the hoops of a full probate.
You can use the simplified small estate process in Kentucky if there is no will leaving personal property, and there is a surviving spouse. Also, the value of the property in the estate that is subject to probate must be $15,000 or less. A small estate is defined by §395.455. This simplified process transfers assets without administration. It is available for estates with $15,000 or less in property subject to probate, where the will does not dispose of any personal property, and where there is a surviving spouse.
Attend a free seminar! If you have questions regarding a Kentucky probate process, or any other estate planning matters, contact Cochrangersh Law Offices, P.S.C. for a complementary consultation either online or by calling us at (502) 423-7023.