Posted by Zach Dana on October 23, 2018
Thinking about what will happen to your possessions after you pass on is not necessarily the easiest or most pleasant thing to do, but it is important regardless. But with the right estate planning, everything can be as painless and worry-free as possible both for in the present and for your loved ones after you pass on. The key here is doing what you can to avoid probate. Here’s what you need to know:
Understanding the Probate Process and Why it Should Be Avoided
So what exactly is probate? In a nutshell, this is the litigation process in which your estate (possessions and property) are divided up and distributed in accordance to what is dictated by your will. Through this process, your will must first be evaluated and proven valid in court. The probate court will also clarify who the will’s rightful executor is and subsequently grant them legal power. In absence of a will, probate will focus on following state laws regarding what is to be done with the estate.
While this can all sound very cut and dry, the truth of the matter is that the entire process is often very lengthy and rife with difficulty, and this is particularly true when people contest the will and / or its designated executor in probate court. Even when nothing is contested, probate still means your loved ones will have to find and report your assets, get involved with court filings, paying creditors and then distributing and (when applicable) closing out the estate. Other things to consider here are the fact that probate can also cost your loved ones quite a bit of money in legal fees and also the fact that everything is on public record in most areas (many families and individuals appreciate their privacy). There’s a lot more to it than this, believe it or not, but that is the general overview of how things will often go. The point here is that the whole process often takes months if not longer. This can be very hard on those already dealing with the difficult situation of your loss, and so it is a wise decision to take steps now to avoid your estate having to go through probate.
What You Can Do Now to Avoid Probate
Because your loved ones will appreciate not having to suffer through probate, there are important steps you can take now to prevent it. But where to begin? Many people falsely assume that drawing up a will alone is sufficient enough to avoid legal issues after they pass on, but the truth is that each individual item in your estate is subject to probate rather than the process being about your estate as a whole. Here’s what you can do instead to avoid this:
1. Consult with an Expert – The first thing you should do is seek the advice of an estate planning expert or attorney experienced in these matters. This way you can better understand what kind of tax implications your following actions may have on those inheriting your estate, not to mention make sure you are following the law.
2. Determine a Trustee and Draw Up a Revocable ‘Living Trust’ – By using what’s known as a “living trust”, you can have a designated trustee transfer the items in your estate quickly and efficiently without having to first go through probate. You will need an attorney to draw up the living trust for you to make it valid.
3. Establish Joint Tenancy – Another way to avoid probate and have your possessions transferred to your loved ones relatively quickly is to establish joint ownership of them with someone else (often a spouse or other trusted family member), also known as establishing “joint tenancy”. This allows them to retain ownership once you pass on and subsequently transfer that ownership to the heir of your choice. Certain states have multiple options for this, so it is again important to consult with an expert on this in your area.
4. Convert Your Accounts to ‘Pay on Death’ Accounts – This concerns most of your financial accounts, including IRAs and even vehicle registrations and deeds in some states (it is important to seek out legal advice on this). Here you can simply fill out a form selecting a direct beneficiary whom ownership will be transferred or “paid out to” upon your death.
5. Gift Your Property While Still Living – If you have property that is worth a lot, the truth is that if you give away ownership now (assuming you can work out an arrangement beneficial to everyone involved in the meantime), that property may avoid both taxes and probate following your death. Have the property appraised to determine value and then consult with an attorney experienced in the transfer of ownership to make sure it is all done correctly.
But What if I Don’t Have a Large Estate?
The bottom line here is that all estates large and small can benefit from proper planning. Even if you don’t own that many possessions or have extensive property, all of it could still be up for a lengthy and costly probate once you pass on if you don’t take the right precautions.
To learn more, contact the Dana Law Group at 1-800-381-8132.