Probate in Maine: Part 3 - Avoiding Probate

Intro: This is a three-part series which attempts to highlight some important features of 18-C M.R.S. §§ 1-101 - 10-118, also known as the Maine Uniform Probate Code. The focus of these articles is on probating an estate after death. I will provide a mixture of law and professional experience navigating the probate system. Part 3 covers not the probate process, but how to stay away from probate, including various legal and financial strategies. Remember that this information does not constitute legal advice, every estate is different and you should not administer someone’s estate or plan your own, based on the information herein.

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If you are finding yourself overwhelmed with the thought of administering a loved one’s estate, or subjecting your own loved ones to your estate, then fear not: there are planning strategies that can be utilized to effectively avoid the probate process. There are several methods for avoiding probate, some of which will each be explained in greater detail in this article. This article will not cover every possible avenue, but will highlight some of the more common and effective strategies. Those methods are: 1) Qualify for a Small Estate, 2) Hold Title as Joint Tenants, 3) Designate Beneficiaries, 4) Hold Assets in a Trust or other vehicle.

Small Estates. The Maine Uniform Probate Code, section 3-1204 permits that your personal representative can file an affidavit stating, among other things, that your estate is valued at $40,000 (adjusted for cost of living) or less. If your entire estate is valued less than this number, then your representative may administer the terms of your estate plan, without the need of a formal or informal probate. They will also be able to use this affidavit to communicate with individuals on behalf of your estate, without further appointment or authority of the court. The issue with this manner of probate avoidance is the incredibly low asset threshold. Most estates are valued at more than $40,000, and most real estate alone will set you over that limit. This method is typically used in conjunction with other methods, to help move personal property, or other smaller accounts which would have otherwise been subjected to probate.

Joint Tenancy. The next method for avoiding probate actually comes from a different section of Maine law; Article 33, § 159 comes from Maine’s real estate code. Because of the way that property law works, the conveyance of real estate, and ownership thereof, can sometimes take priority over other laws, such as the probate code. In this instance, any conveyance of real estate in which two or more persons are the recipients of property by a deed which lists them “as joint tenants” or “in joint tenancy” or with “rights of survivorship” will create a legal relationship among those parties. The legal relationship states that in the event of the death of one of those owners, the remaining owner(s) automatically assume ownership of the deceased’s share. That transfer happens immediately and without the need for any additional documentation, court cases, or deeds to be drawn up. Because this transfer happens immediately, the real estate will not be subjected to the decedent’s estate, and not be subject to probate. This type of property ownership is also not limited to real estate, you can hold title to other types of assets, including certain financial accounts, jointly, with other account-holders.

Joint tenancy is not without fault. Always speak with an attorney before you sign any deeds and before you add your loved ones to your property or accounts. There are significant legal and tax repercussion for utilizing this strategy which may differ, depending on your particular situation and how this is accomplished. I do not recommend that you take any action without first speaking in detail with your attorney about your goals and your entire situation.

Beneficiary Designation. On some financial accounts, you are allowed to name beneficiaries, or pay on death (POD), or transfer on death (TOD) recipients. Section 6-101 and 6-102 of the probate code control what are called “Nonprobate transfers.” Any provision regarding the transfer of an asset which is not controlled by your Last Will and Testament is considered “nontestamentary” and not subject to probate. These nontestamentary transfers, the most common of which are beneficiary designations, will pass according to the rules that the decedent agreed to during their lifetime. That often means that the assets which have a beneficiary associated with them will pass to that beneficiary without the need for probate. That does not mean that there are not additional rules that are required to make that transfer effective. When you establish a bank account, for example, you execute an agreement with that bank. When you name beneficiaries on that account, you are further agreeing - and thereby binding your beneficiaries - to the bank’s rules. Typically, the requirements to make such a transfer effective are simpler than those of probate, but keep in mind that whatever terms and conditions were agreed to will need to be honored before that asset can pass to your beneficiary.

While avoiding probate may seem like the best course of action, be careful about creating discrepancies in your plan. Any estate plan which is open for interpretation is an opportunity for misinterpretation. Leaving all of your assets to your most responsible child to then later hand out to their siblings is a recipe for disaster. If your assets are utilizing beneficiary designations and skipping probate, remember that this means they are also skipping your Will. If the Will is the vehicle which is controlling the distribution of your estate, your rules will only get followed for the assets which are subject to probate. This means that you could inadvertently skip possible protections, rules, special instructions, and distribution plans which were included in your Will, by virtue of naming beneficiaries and joint owners. You can often avoid these pitfalls, and more, by utilizing a trust as your estate planning vehicle.

Trusts. A final solution to avoiding the probate process is setting up a trust to control the distribution of your estate. The idea here is that rather than participating in the public administration which is the probate process, your trust can create a private administration of your wealth - using your own rules, your own agents, and thereby skipping the court case and all of the potential issues which come along with that. Whenever we are talking about trusts it is important to be clear about what your goals are and which type of trust we are utilizing to achieve those goals. There are many different trust structures, each carrying with them their own acronyms and rules. See my article on trusts here. Any assets which are titled into the name of a trust qualify as nonprobate transfers, and will not be subject to most of the rules of probate. Depending on the trust, this does not necessarily mean that your creditors cannot still make claims on your estate, although sometimes that is true.

The probate process in Maine can be daunting and overwhelming for a lot of people. You may not want to subject your loved ones to this. The good news is that there are usually strategies available to avoid probate. If you are thinking about planning for your beneficiaries and you want to explore some of the options that are available to you, please take an opportunity to sit down with an attorney who can review those with you. If you would like to sit with me to further explore this, you can navigate to my contact page and set up an appointment today to meet with me.