Probate and How to Avoid It
When your time on this planet finally comes to an end, your family and closest friends will already be suffering from immense grief due to your loss. For this reason, probably the last thing you want to do is to cause them more stress and trouble, which is likely what will happen if you don’t make final arrangements ahead of time. According to a 2016 Gallup poll, 55% of Americans don’t have a will, which means their loved ones will be stuck trying to pick up the pieces after they pass.
Unfortunately, even with a properly drafted will, it’s most likely that your estate will still have to go through probate court proceedings in order to transfer your assets to your designated heirs. The problem is that probate can be a time-consuming, expensive, and often confusing process. Luckily, you have options to ensure your loved ones don’t have to go through the probate process.
Avoiding Probate with a Living Trust
Although it is quite similar to a will in many ways, a living trust is an effective method of ensuring that your assets don’t have to go through probate court to be transferred. With a living trust, you designate one or more trustees to oversee your assets within the trust.
- When you create a trust, you are essentially transferring ownership of all trust property from yourself to the trustees.
- For this reason, it is always a good idea to name yourself as one of the trustees to ensure that you still retain control over your property until your death.
- When your time finally does come, the remaining trustee(s) will gain full legal control and ownership of the trust.
- The trustee is then authorized to transfer the assets as you’ve specified.
Another simple way to avoid having some of your assets go through probate is to designate someone as a beneficiary upon your death.
- While most people commonly name beneficiaries for things like retirement accounts and life insurance policies, many states also give you the option to name beneficiaries for your bank accounts and other investment accounts.
- These ‘payable-on-death’ or ‘transfer-on-death’ accounts ensure that your beneficiary will immediately become the holder of such of an account when you die without having to first go through probate.
- Some states also allow you to do the same thing with real estate property through the use of a so-called life estate deed. With this type of deed, you can designate a beneficiary to whom the property will immediately be transferred in the event of your death.
Joint Property Ownership
Another way you can avoid probate on real estate, vehicles, and other types of property is to choose joint ownership. There are several different types of joint ownership options available depending on where you live and who you wish to designated as a co-owner of your property. However, they all basically work in the same way.
- As you will co-own the property with another person, the property will automatically pass to the co-owner in the event of your death.
- Similarly, you will become the sole owner should your co-owner pass away.
Giving Property Away Before Your Time Comes
If you have already decided who will receive your property after you pass away, you may want to consider giving it to them as a gift before you pass. Divesting assets beforehand will lower the overall costs of the probate proceedings, since these tend to be higher for larger estates. This will save costs for your beneficiaries and it’s possible that the recipient might be able to avoid paying federal tax on what they inherit. However, check with a probate or estate lawyer Sacrament relies on to be sure how your estate might be taxed.
As you can see, you actually have quite a few options that can allow you to prevent your estate from going through probate. Although it may require some effort on your part, an estate planning attorney or probate lawyer can do the heavy lifting for you, including filing the necessary paperwork.
Thanks to our friends and contributors from Yee Law Group for their insight into estate planning and probate practice.
See our Facebook page here.
See our Twitter page here.