How to avoid probate?
Although most people use a Will to pass their assets to their beneficiaries, there are other ways to wind up an individual’s legal affairs without having to go through the probate process.
How can probate be avoided?
1. Joint tenancies–they automatically pass the asset to the surviving joint tenant at death
2. Life estate-they automatically pass the asset to the remainderman at death
3. Beneficiary designation-this automatically passes the asset to the designated transfer-on-death or payable-on-death beneficiary at death
4. Living trust-avoids probate because the assets are in the trust at death
What is probate?
Probate refers to the court-supervised process that allows one to conclude the deceased’s legal affairs. in the typical proceeding, the court will recognize the validity of the Last Will and Testament and authorize the executor to the collect the assets, pay the debts, calculate and pay the inheritance tax and distribute the balance to the beneficiaries. In most cases it requires the assistance of an estate attorney.
The significant drawbacks to most of these techniques is that they can result in unfavorable tax consequences, loss of control and/or insufficient incapacity planning. Furthermore, probate avoidance can be expensive since a living trust must be carefully drafted and funded. Often the costs involved can be as much as probate.
Probate avoidance requires that each asset be examined to see how it is titled. Many assets will have to be retitled to work with the estate plan. The individual will have to invest time and energy so that the executor will not need to do so following death. There is a great deal of work to accomplish to establish the estate plan.
Although there may be privacy concerns, a Will is not generally read by the public. It is simply filed in the courthouse.