Posted on: 19 January 2016
Are you considering how best to pass on your assets to your heirs after you pass away? Having a will is a good first step, as a will provides direction as to which heirs should receive which assets. Unfortunately, a will doesn't bypass something called probate, which is a legal process in which the court settles your estate. Probate can last for months and can require a tremendous amount of time and effort from your estate executor. It also may cost your heirs money as they may have to pay court and administrative fees. Fortunately, there are ways to bypass probate so your heirs can avoid fees and get their assets faster. Here are four popular ways to avoid probate:
Use a trust. Assets that are owned by trusts usually don't go through probate. That's because even though you have passed away, the trust is still in existence, so those trust-owned assets aren't included as part of your estate in the settlement process. The trust documents dictate how the assets should be distributed. You simply establish the trust while you're alive and then change the title on the assets that should be included in the trust. When you pass, those assets will be distributed according to your wishes, as documented in the trust.
Maximize accounts with beneficiary designations. Similarly, accounts that have a beneficiary designation also won't pass through probate. These include assets like life insurance and qualified retirement accounts, such as 401k plans and IRAs. When you pass away, your beneficiaries simply fill out a claim form, and the administrator of the account sends them their payment. They don't have to wait on the court to finish the settlement process.
Joint ownership. Another way to avoid probate is to list assets under joint ownership. When you pass away, the asset will pass to the joint owner without going through probate. Of course, there are a couple of things to consider with this. First, with most assets, you will likely only be able to include one other person as a joint owner, so this won't work if the asset needs to be split among several heirs. Also, keep in mind that the joint owner will have full ownership rights. If you're not comfortable with them being a co-owner while you're alive, this may not be the best solution.
Gifting assets. Finally, one great way to avoid probate is to simply gift money and assets to your heirs before you pass away. The assets will then be out of your estate so they won't have to go through probate. Also, as an added benefit, you'll get to watch your heirs enjoy their inheritances while you're still alive. You can help them buy their first home, pay for their education, or anything else that is important to them and you.
For more information, contact Flaccus Law or a similar firm.Share