Avoiding Probate: Why it Matters, How to Do It, and the Trade-Offs

Probate is the legal process of distributing a deceased person’s assets under court supervision. While it’s designed to ensure everything is handled properly, it’s often

time-consuming, expensive, and public. That’s why many individuals and families take proactive steps in order to avoid it altogether. Here is an outline of the key reasons for avoiding probate, several common methods to do so, and the limitations of each method.

Why People Want to Avoid Probate

1.  It is a time-consuming process.

Probate can take up to years to complete, depending on the complexity of the estate and whether there are any disputes among heirs. During this time, beneficiaries may not

have access to important assets they need.

2.  It is a costly process.

Probate can be expensive. Legal fees, court fees, executor fees, and other administrative costs can eat up a significant portion of the estate. Michigan does not have fixed statutory probate fees, but the costs still add up.

3.  It is a public process.

Probate lacks privacy, which means anyone can view the details as part of the public record. Access includes the details of the estate and who is inheriting what.

4.  The risk of dispute increases.

Everything is on record and supervised by the court, which means probate may attract challenges from unsatisfied heirs or third parties.

5.  It is an inconvenience for the family.

The process requires time, paperwork, and court filings, which can be overwhelming for loved ones during a time of grief.

Ways to Avoid Probate

1.  Revocable Living Trust

One of the most effective ways to avoid probate in Michigan is through a revocable living trust. The trust owns the assets during the person’s life, and a successor trustee distributes them upon death without court involvement.

-    It requires upfront legal work and cost to set up.

-    Assets must be properly titled in the trust’s name.

-    It doesn’t avoid taxes or creditor claims.

2.  Enhanced Life Estate Deed (Lady Bird Deed)

This allows the homeowner to name a beneficiary to receive real estate after their death, while keeping full control over the property during their life. This avoids probate on the home.

Drawbacks

-    It only applies to real estate.

-    It may impact Medicaid eligibility if not structured correctly.

-    It needs to be drafted carefully to avoid title issues later.

3.  Joint Ownership with Right of Survivorship

Assets such as bank accounts or real estate held as joint tenants with right of survivorship pass directly to the surviving owner upon death.

Drawbacks

-    It exposes the asset to the co-owner’s liabilities. (e.g. lawsuits, debt)

-     It may not align with the overall estate planning goals if multiple heirs are involved.

-    It can create gift tax or Medicaid planning issues if not done properly.

4.  Payable-on-Death (POD) and Transfer-on-Death (TOD) Designations

Bank accounts can have POD designations, and securities such as stocks or mutual funds can have TOD designations. These are simple, inexpensive, and allow the funds to pass directly to the named beneficiary.

Drawbacks

-    It only applies to accounts with these designations.

-     If the beneficiary is deceased or there’s no backup, the account may still go through probate.

-    There is no control over how or when the beneficiary uses the funds.

5.  Beneficiary Designations of Retirement Accounts and Life Insurance

IRAs, 401ks, and life insurance policies let you name a beneficiary, and those assets pass outside of probate.

-    Beneficiaries must be updated regularly.

-     If no beneficiary is named or the beneficiary dies first, the asset may fall back into the probate estate.

-     It is not ideal for complex distributions (e.g dealing with minor children, staggered payouts)

6.  Small Estate Affidavit

If the value of the estate after funeral costs is less than $51,000, a simplified process is offered. Heirs can use a Small Estate Affidavit to claim personal property without going through full probate.

Drawbacks

-    It is limited to smaller estates under the threshold.

-    It cannot be used for real estate transfers.

-     It still requires proper documentation and may need to be filed with the probate court.

In Michigan, avoiding probate is often a smart financial and emotional decision. It saves time, reduces legal fees, and protects family privacy. Thankfully, the state offers several legal tools to help residents achieve this.That said, each method comes with limitations, and using the wrong one, or using it incorrectly can create bigger problems than it solves. That’s why it’s important to take a comprehensive approach, ideally with the help of an attorney, to ensure that assets pass smoothly and according to the individual’s wishes.