What Is Probate, and Can I Avoid Probate?
One of the first questions estate planning clients ask is how they or I can avoid probate. But, before we get into ways you may be able to avoid probate all together, it’s important to understand what probate actually is.
Probate is the legal process that’s initiated upon the death of someone who has an estate of some kind, but has died without a verifiable will in place.
When you pass without any will at all (or without a verified, legal will), the court takes over the distribution of your assets and determines who should receive the property in the estate.
So, why is everyone so anxious to skip the probate process?
Simply put, it’s a huge hassle.
Not only does the system take time to sort through an estate, but often times the government also charges fees on the estate as payment for taking the time to divide and distribute the assets.
And, what’s more – the way the court distributes your estate may not be the way you wanted it done, which is why it’s important to have a will and an estate plan in place, even if all your assets can’t avoid probate.
But, there’s light at the end of the tunnel!
In certain cases and with proper planning, you can avoid probate. Today we’re going to talk about a few of the most common ways to do just that.
- Give Property as Gifts
- Own Property Jointly
- Create a Revocable Living Trust
- Assign TOD & POD Beneficiaries
Give Property as Gifts
If you are in the position to distribute some of your assets before you die, you can give property away as gifts while still living and avoid probate on the transferred assets.
This is a simple solution that works well. Since you won’t technically own the property anymore, it’s not part of your estate and will not need to go through the probate process.
Own Property Jointly
For spouses this solution is especially practical and very common. When you own property jointly either as tenants with rights of survivorship; tenants by entirety, or if it falls under ‘community property’ laws, you can avoid probate.
Essentially what happens is, when you die, your interest in the property is automatically transferred to the surviving owner.
Create a Revocable Living Trust
A revocable living trust does more than allow you to leave specific and conditional inheritance directions, it can also help you avoid probate.
Whatever property you assign to the trust are no longer held by you, they belong to the trust and are under ownership of the assigned trustee. Upon your death that person can then quickly distribute the assets according to your directions and without consulting the courts.
Assign Transferable on Death & Payable on Death Beneficiaries
Lastly, you can assign beneficiaries through a special provision known as transferable or payable on death. Most financial and banking accounts have this as an option. It allows you to assign a beneficiary and make sure the assets in the account are quickly distributed to that person without the hassle of additional banking forms or going through probate.