When creating an estate plan, you’ll spend a lot of time thinking about what will happen to your assets upon your death.
While not required by law, you may want to implement a plan for ensuring that your estate avoids the probate process. This can save your loved ones both time and money upon your death.
There are many ways to avoid the probate process, including:
- Joint property ownership: Jointly owned property with the right of survivorship allows the asset to transfer to the surviving individual without going through probate. In addition to joint tenancy with the right of survivorship, other options include tenancy by the entirety and community property.
- Name a death beneficiary: You can’t do this with all your assets, but it’s possible with some of them. For example, you can specify a beneficiary on retirement accounts, such as a 401(k) and IRA. The same holds true for your life insurance policy.
- Revocable living trust: When you transfer property into a trust, you’re no longer the owner. It now belongs to the trustee. Since you don’t own the property, it doesn’t go through probate upon your death. A revocable living trust is more complex than a will, but it’s one of the best strategies for avoiding probate.
- Gifts: One of the simplest ways to avoid probate is to make gifts while you’re living. Since there are federal and state laws in place, such as gift taxes, make sure you plan accordingly.
The nice thing about the above ways to avoid probate is that you can combine them to suit your goals. For example, you may want to create a revocable living trust, while also making annual gifts to your loved ones. This gives you more control over your estate and the probate process in general.
Probate doesn’t have to be an ugly word. When you plan accordingly, you’ll have fewer concerns about what will happen to your assets upon your death. Not to mention the fact that probate planning takes a lot of stress off of your loved ones during a difficult time.
Even if you only use one of the above probate avoidance strategies, you’ll come to find that it benefits you and your family.