When creating an estate plan, most people typically have one thing in mind: securing their assets as efficiently as possible to pass them on to their loved ones. However, upon your passing, your assets will likely go through a necessary legal process called probate, under which a court will manage the transfer of your money and property.
Probate can be lengthy, costly and very public, which is why many look to avoid it in hopes of protecting their heirs from the chaos of public proceedings, especially during a time of grief. Fortunately, strategies are available to minimize the impact of probate or even bypass it altogether, ensuring your assets will reach your loved ones more directly.
Establish a trust
Creating a trust eases the transfer of your assets to your beneficiaries and cuts probate out of the process. Instead, a trustee will administer the assets under the terms of the trust agreement, streamlining the distribution of inheritance to your designated beneficiaries.
Own property jointly
Having joint property ownership with a spouse or someone close to you is another way to avoid probate. This applies to real estate and other types of private property, like bank accounts. Some examples of holding assets that transfer property to a co-owner include joint tenancy with the right of survivorship, tenancy by the entirety and community property with the right of survivorship.
Create payable-on-death accounts
Financial accounts can have payable-on-death clauses specifying that assets should automatically transfer to a designated person upon your passing without going through probate. These may include bank accounts, retirement funds and life insurance policies with named beneficiaries.
Incorporating these strategies into your estate planning can help you protect your loved ones from the added expenses and stress that comes with lengthy probate proceedings. However, the most effective method for steering clear of the probate process still depends on the nature of your assets, estate goals and beneficiaries’ needs. It is best to consult an estate planning attorney to find the best strategies for your situation.