By creating a living trust, naming beneficiaries, and jointly holding property, you might be able to avoid probate.
Everyone would like to pass on something to our children or others close to our hearts. We save and save to make life a bit easier for those we care about. The last thing people wants is to give a big part of their well-earned money to the government in the form of probate costs. Neither do we want our loved ones, particularly our significant other and children to wait months, possibly years to receive anything.
Ways To Avoid Probate
Bypassing the postponement and expense of probate is a lot easier than you believe. Below are some basic pointers to retain more of your estate in the possession of the people that matter to you most.
Devise a living trust
The most direct way to bypass probate is simply to devise a living trust. A living trust is plainly a substitute to a last will. Dissimilar to a will, which just distributes your assets upon your passing away, a living trust puts your assets and property “in trust” whereupon are then overseen by a trustee on behalf of your beneficiaries. It allows you to bypass probate entirely since your property and assets are already distributed through the trust.
- A trust also allows you to avoid the expense of probating a will.
One primary disadvantage of a will is the expense of having it probated or passing it through court. Through probate, there are court costs taken from the entire estate (the amount of the whole estate prior to the liabilities being paid out). These costs can sometimes reach 10% of the entire estate which usually is better used paying trustee costs and burial expenses. Having a living trust you bypass these court costs all together.
Appoint beneficiaries on your retirement and financial institution accounts
For many, a last will is usually a better fit than a trust since it is a more direct estate planning document. Nevertheless, just since you have devised a will does not mean that all of your assets have to go through probate. What a lot of people don’t understand is that many of our most valued assets enable us to appoint beneficiaries. In reality, you might not have realized that the financial institution account you opened when you landed your first job most likely enables you to appoint a beneficiary that is (POD) payable on death.
Though it may seem straightforward enough, a lot of people don’t take the time to actually appoint a beneficiary and/ or beneficiaries for their financial institution accounts, investments and retirement plans. POD accounts comprise of life insurance policies, 401K’s, pension plans, Individual Retirement Arrangement accounts, securities, etc.
All you must do to get started is to request and fill out the POD forms that your brokerage company or financial institution can provide. Don’t forget, when you are married, many of these accounts automatically might be partially owned by your significant other. By taking the time to fill these forms out, nevertheless, you guarantee that the proceeds are instantly dispersed at passing without having to go through probate, saving a lot of time and a lot of cost.
For some, a last will can be a perfect alternative to a living trust.
Holding property jointly
Another good way to stop your real estate from going to probate is to think about jointly holding your property. If you and a spouse or SO are contemplating buying a first home or even presently own you own home, owning jointly enables the property to pass systematically to your significant other devoid of going through probate. It does not matter if you are married or not. When the property is appointed a jointly held property it goes to the living member of the couple.
Obviously, you are going to want to make sure you name this ownership plainly. You might also want to look into Tenancy by the Entirety and for married spouse in states that are Community Property ones you are going to want to look into look into jointly-owned property as Community Property with the Right of Survivorship.
Some states even offer an accelerated probate for what they deem as “small estates.” Obviously, you are going to want to look into the laws of your state for what is deemed as a small estate. Usually, this designation can signify that an estate is less than a specific amount, or it might also mean there is no real property for the courts to look into.
Source:
- Lapin, C. (2023, January 25). The top three ways to avoid probate. LegalZoom. Retrieved February 15, 2023, from https://www.legalzoom.com/articles/the-top-three-ways-to-avoid-probate
