There are several ways to avoid probate. Probate is the legally required process by which a deceased person’s assets are distributed according to their will or, if there is no will, according to state law. It is time-consuming, costly, and public, so it’s no surprise that many people want to avoid it.
Here are the top 5 ways to avoid probate and examples of how to implement them for various assets:
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Designate beneficiaries: One of the easiest ways to avoid probate is to designate beneficiaries for your assets. This is typically done by filling out a beneficiary form for each account or asset. This way, when you pass away, the assets are distributed directly to the named beneficiaries. Some assets that can be designated with beneficiaries include brokerage accounts, retirement accounts, 401k accounts, and life insurance policies. For example, if you name your spouse as the beneficiary of your retirement account, the account will be transferred directly to them when you pass away, without going through probate.
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Joint ownership: Another way to avoid probate is to own assets jointly with someone else. When one owner dies, the other owner automatically becomes the sole owner of the asset. Some assets that can be owned jointly include homes, rental properties, and businesses. For example, if you own a rental property with your spouse, when you pass away, your spouse will become the sole owner of the property without going through probate.
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Living trusts: A living trust is a legal document that allows you to transfer assets to a trust during your lifetime. When you pass away, the assets in the trust are distributed to your beneficiaries according to your wishes, without going through probate. Some assets that can be transferred to a living trust include homes, rental properties, and other assets such as gold. For example, if you transfer ownership of your rental property to a living trust, when you pass away, the property will be distributed to your beneficiaries according to the trust’s instructions.
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Payable-on-death accounts: Similar to designating beneficiaries, payable-on-death accounts allow you to name beneficiaries for your bank accounts, investment accounts, and other financial accounts. When you pass away, the assets in the accounts are distributed directly to the named beneficiaries, without going through probate. For example, if you name your children as the beneficiaries of your bank account, the account will be transferred directly to them when you pass away, without going through probate.
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Gifting: One way to avoid probate is to give away your assets during your lifetime. This can be a good strategy for people who want to see their loved ones enjoy their inheritance while they’re still alive. Some assets that can be gifted include cash, investments, and real estate. However, it’s important to be aware of the gift tax and other tax implications of gifting. For example, if you give your child a rental property, they will become the owner of the property and it will not be subject to probate when you pass away.
Married couples and single persons with children may have different considerations when it comes to avoiding probate. For example, married couples may want to take advantage of joint ownership or designating each other as beneficiaries, while single persons may want to create a living trust. Parents with young children may want to consider setting up a trust to ensure their children are taken care of in the event of their untimely passing.
Whether you’re looking to avoid probate, protect your assets, ensure your family is taken care of after you’re gone, or plan for long-term care, it is important to seek out expertise guidance to help you achieve your goals. Estate planning can be complex, overwhelming and you need to fully understand your options and make informed decisions. The Fee-Only network at EstatePlanAdviser.com can provide a range of estate planning services, including:
- Creating a will or living trust to ensure your assets are distributed according to your wishes.
- Designating beneficiaries for your retirement accounts, life insurance policies, and other assets.
- Setting up a durable power of attorney to appoint someone to manage your finances if you become incapacitated.
- Developing a plan for long-term care, including Medicaid planning and eligibility requirements.
- Advising on business succession planning to ensure your business continues to thrive after your passing.
A Fee-Only approach means that you can trust that our recommendations are unbiased and in your best interest. Our team includes Fee-Only Financial Advisers, CPAs and Attorneys, which means that we can provide comprehensive advice on all aspects of your estate planning.
Contact us today by Clicking Here to schedule a consultation and start planning for the future. Alternatively, visit 1800ADVISER.COM to browse biographies of individual advisers and choose one or more to connect with.
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