We'd all like to leave something special to our children or other loved ones. We save and save in order to make life easier for the people we care about. Nobody likes to give the government a big chunk of their hard-earned money in the form of probate fees. We also don't want our loved ones, especially our husbands and children, to have to wait months or even years for a cent.
It is considerably easier than you think to avoid the delays and costs of probate. Here are some general guidelines to help you retain more of your estate in the hands of the individuals who matter the most.
1. Write a Living Trust
Simply establishing a living trust is the simplest approach to avoid probate. Just like a last will, a living trust is an alternative. A living trust places your property and assets "in trust," where they are then administered by a trustee for the benefit of your beneficiaries, as opposed to a will, which just transfers your assets upon death. Due to the fact that the property and assets have already been transferred to the trust, you can completely avoid probate.
You can also avoid the expense of probating a will by using a trust.
The expense of probating a will or having it approved by the courts is one of its principal downsides. Court costs are deducted from the gross estate during probate (the amount of the entire estate before the debts are paid out). This fee, which is frequently higher than 10% of the estate's value and would be better spent on trustee fees and funeral expenses. You can completely avoid these court fees by using a living trust.
2. Designate Beneficiaries for Your Bank and Retirement Accounts
Because a last will and testament is a simpler estate planning document, it may work better for some people than a trust. However, just because you have a will doesn't necessarily mean that all of your possessions must pass through the probate process. Most individuals are unaware that we can designate beneficiaries for many of our most important assets. In reality, you might not have known that you could name a beneficiary who will get money upon your death on the bank account you opened when you got your first job.
Despite the fact that doing so may seem straightforward, many people neglect to choose a beneficiary or beneficiaries for their bank accounts, investments, and retirement plans. Life insurance policies, pension plans, 401K plans, IRA accounts, equities, and bonds are all examples of accounts that are payable on death.
Requesting and completing the payable on death forms that your bank or brokerage firm can offer will get you started. Keep in mind that if you are married, your spouse may automatically hold a portion of some of these accounts. However, by spending the time to complete these paperwork, you can guarantee that the proceeds are instantly distributed after death without going through probate, saving a lot of time and money.
A last will and testament is frequently a great substitute for a living trust.
3. Hold Property Jointly
Consider keeping your property jointly if you want to keep your real estate out of probate. Owning jointly enables the property to pass to your significant other automatically without going through probate if you and your husband or other romantic partner are considering buying your first home together or even currently have your own home. Whether or not you are married is unimportant. The property will go to the surviving spouse of the pair if it is listed as a jointly held property.
Of course, you'll want to be sure to specify this ownership in great detail. If you're married and live in a community property state, you might want to consider designating jointly owned property as community property with a right of survivorship. You might also want to consider tenancy by the entirety.
For what they refer to as "small estates," some states even provide an expedited probate process. Of course, you should research the regulations in your jurisdiction regarding what constitutes a small estate. This designation frequently means that there is no actual property for the court to look at or that an estate is smaller than a particular amount.
