Once you begin your estate planning journey, you will likely encounter a common refrain from professionals: Avoid probate at all costs. But what does that mean, and why is it so important?
Probate refers to the court-supervised process of distributing your assets after you pass away. It can be time-consuming, expensive and very public, making it understandable why many wish to steer clear of it altogether. The good news is that with proper planning, you can structure your estate in a way that bypasses this legal procedure. Here are some strategic tools you can use to ensure that your hard-earned wealth reaches your loved ones as you intended.
Trusts
When it comes to avoiding probate, one of the most effective strategies is to use trusts. When you set up a trust, you are essentially transferring ownership of your assets to a trusted individual or entity, known as the trustee, who will manage them on behalf of your beneficiaries. Through this arrangement, your assets are effectively no longer part of your estate and, therefore, not subject to probate. This crucial estate planning tool is particularly useful for avoiding probate when you have complex assets, such as real estate, businesses or investments.
Joint ownership
When you own an asset jointly with someone you trust, such as a spouse or family member, you can rest assured that it will automatically pass to them when you are gone. This can be a straightforward and effective way to avoid probate, especially if you are a married couple who owns property together. Just keep in mind that joint ownership can come with its own set of complexities, such as potential disagreements between co-owners or unintended tax consequences.
Payable on death and transfer on death accounts
With these types of accounts, you can designate a beneficiary who will inherit the funds directly. This can be a convenient and straightforward way to pass on smaller assets, such as savings accounts or certificates of deposit, to those you care about. Your beneficiary can access the funds directly without the need for probate, making it a simple and efficient way to transfer your assets.
In estate planning, it is crucial to keep in mind that every situation is unique. By taking the time to explore your options and plan carefully, you can create a secure and peaceful future for yourself and your family.