Avoiding probate as a strategy and fulfilling your estate obligations can work together if planned properly. Although avoiding probate is a preferred estate planning strategy, the strategy will fail if your plan overlooks taxes and debts. Therefore, while planning, you must account for all taxes and debts of the estate or unintended consequences may result.

The Unintended Consequences of Neglecting the Estate Obligations

If avoiding probate is the focus of your estate plan, then you must cover the taxes and debts of the estate as discussed in the article, Commit Enough Assets to Cover Expenses in Your Estate Plan. In a probate avoidance strategy, failure to plan properly for the estate obligations can have the following unintended consequences:

1. If avoiding probate, time is unlimited for creditors to make claims on the estate after your death. The creditors have the right to make a claim against the estate at any time. Additionally, the creditors could track down and sue the new owners of the property to collect the debt.
2. If assets were lacking to cover estate obligations, then the executor may demand inheritors to return some or all of the property to pay the debts. This consequence will most likely result in belligerence from the beneficiaries.

To avoid unintended consequences, thorough planning for the estate obligations must be your priority while employing the probate avoidance strategy.

Avoiding Probate and Creditor Protections

Avoiding probate also avoids the legal requirement to notify creditors of your death. As a result, the following random protections may occur:

• It may be years before creditors find out about your death or where your property went.

• If the debt is small, creditors would most likely overlook the debt.

In common estates, people shouldn’t worry about creditors making large claims against the estate. However, if large claims or other estate obligations worry you, consider using probate for your property.

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Reference

What Probate Avoidance Can’t Change by Mary Rudolph, J.D., Nolo