As you may already know, not all of a deceased person’s assets need to go through probate if you know how to avoid probate. Probate can be avoided through the use of a number of legal mechanisms including:-
(i) payable on death, transfer on death or joint accounts;
(ii) insurance policies;
(iii) joint ownership of property;
(iv) revocable living trusts;
(v) lifetime gifts; and
(vi) having property valued at or less than the limit allowed for a simplified procedure that many states allow when estates are small.
Of course, if you do not provide for the transfer of all of your assets by means of the above mechanisms, or indeed any of the other probate avoidance mechanisms, probate will be necessary.
Probate avoidance measures themselves have several advantages. For example, they are flexible and easy to set up. Bank accounts and insurance policies can be established, amended, and terminated with little hassle or cost. As a result, you can easily and quickly change the beneficiaries of your assets or the amount by which you intend them to benefit by means of a simple visit to the bank or your insurance broker. And after you die, the only document that your beneficiaries will typically need to present to the bank or insurance company is a death certificate evidencing your death. With that, the financial institution should be happy to make arrangements to have the relevant proceeds transferred into the names of your beneficiaries or paid out to them.
There are however some disadvantages to avoiding probate. You need to be very careful to ensure that all of your probate avoidance alternatives are working together to avoid probate (whether in whole or in part) and, more importantly, to distribute your assets in accordance with the overall objectives of your estate plan. In this regard, you need to pay specific attention to the beneficiaries named in joint bank accounts, insurance policies, the way real estate (i.e. as a joint tenancy with a right of survivorship) is held, etc. Any lack of attention could result in one person receiving a lot more than you had intended to the detriment of someone else. Don’t forget, by the time a problem materializes with any of your probate avoidance mechanisms you may not be around to remedy it.
The most used method to avoid probate is a revocable living trust. Revocable living trusts avoid probate by transferring your assets from your own personal name to the name of a trust. Because the asset is not in your name at the time you die it will not form part of your probate estate and can therefore avoid probate altogether. Following your death, the successor trustee in charge of your living trust simply transfers the asset in accordance with the terms of your living trust.
How Can We Help You?
For more information on how to avoid probate, check out our book Make a Living Trust & Avoid Probate. It will guide you step-by-step through the matters you need to consider when making a living trust. You’ll learn all you need to know about living trusts, their advantages and disadvantages, the tax implications, the alternatives to living trusts and, of course, how to easily make your own. With detailed information, easy-to-follow instructions, helpful worksheets and all of the forms necessary, we show both individuals and couples how to avoid the otherwise inevitable delays and costs of probate by preparing a revocable living trust and using other simple probate avoidance strategies.
If you have already done your homework, and want to make a living trust now, you can jump straight to our Online Living Trust Software. You’ll be able to go through the entire process of making a living trust for free, and in less than 10 minutes. You only pay for your document if you wish to download it.
For more information on any of our products, contact our customer service team who are here to help you.
Adrienne is an author and estate planning expert.