Being able to pass along belongings to our children or loved ones is important to most people. Throughout our lives, we save and save to make life a little easier for the people we care about. The last thing anyone wants to do is to give a large portion of their hard-earned money to the government in the form of probate fee. Also, we don’t want our loved ones especially our spouses and children to wait months, even years to receive a dime.
Avoiding the delays and costs of probate is much easier than you think. Here are some basic tips to keep more of your estate in the hands of the people who matter most.
- Write a living trust
Avoiding probate is straight forward and is simply creating a living trust. A living trust is an alternative to a Last Will. Unlike a will which only distributes your asses upon death, a living trust will place your assets and property “in trust” which will then be managed by a trustee for the benefit of your beneficiaries. A living trust will allow you to avoid probate entirely because the property and assets are already distributed to the trust.
A trust will also enable you to avoid the cost of probating a will. One of the main drawbacks of a will is the cost of probating it or passing it through the courts. In probate there are court fees that are taken from the gross estate (the amount of the entire estate before the debts are paid out). A ten percent fee of the total estate is often better used paying trustee fees and burial costs. With a living trust you avoid court costs all together.
- Name beneficiaries on your retirement and bank accounts
Last Wills may be a better fit for some because it is a more straightforward estate planning document. Just because you have a written Will does not meant that all your assets must pass through probate. Most people don’t realize that many of our most valued assets allow us to name beneficiaries.
All though this may seem simple, many people don’t take the time to name a beneficiary or beneficiaries for their bank accounts, investments and retirement plans. Payable on death accounts include life insurance policies, pension plans, 401K plans, IRA accounts, stocks and bonds.
To get started, all you will have to do is request and fill out the payable on death forms that your brokerage company or bank can provide. Come of these accounts may be partially owned by your spouse if you are married. When you take the time to fill out these forms, you ensure that the proceeds are immediately dispersed at death without having to pass through probate which will spare a lot of time and expense.
- Joint tenancy with a right of survivorship
Another alternative to keep your real estate out of probate is to consider holding your property jointly. If you and a significant other are thinking about purchasing a first home or even already own your own house, owning jointly allows the property to pass automatically to your significant other without having to go through probate. It doesn’t matter if you are married or not, it is designated jointly held property it is going to go to the surviving member of the couple. You will also want to look into Tenancy by the Entirety and for married couples in Community Property states you will want to investigate designating co-owned property as Community Property with a Right of Survivorship.