You should know some things about the probate process when you are planning your estate. If you use a last will to direct the distribution of your personally held property, the property would become probate property at first except in the case of a modest estate.
During probate the probate court supervises the administration of the estate. The heirs to the estate typically do not receive their inheritances until this process has run its course.
A simple and straightforward case will typically pass through probate in about a year. This time lag can cause difficulties for some inheritors.
In addition to the time consumption, there are various costs that can pile up while the process is underway. Everything that is spent during probate would have otherwise gone to the heirs.
The good news is that there are a number of different ways that you can get assets into the hands of your loved ones outside of probate.
Payable on Death Accounts
When you open a bank account or a brokerage account, you can name a beneficiary. This is called a payable on death (POD) account.
The beneficiary cannot touch the funds while you are living. After you pass away, the beneficiary would assume ownership of the assets that remain in the account. This transfer would not be subject to the probate process.
There are potential problems with the use of POD accounts, especially for young and disabled beneficiaries. Consult with an experienced and qualified estate planning attorney for guidance.
Life Insurance Proceeds
If you have an insurance policy on your life, the beneficiary would receive the proceeds in a direct manner after you pass away. The probate process would not be a factor.
Again there are potential problems with the use of such beneficiary designations, especially for young and disabled beneficiaries. Consult with an experienced and qualified estate planning attorney for guidance
If you were to add someone to the title of property that you own, this individual would become a joint tenant. The joint tenant would immediately own half of the property, even while you are living.
After you pass away, the joint tenant would inherit the entirety of the property, and this transfer would take place outside of probate.
Once again, there are potential problems with the use of joint tenancy, including, but not limited to, unwanted exposure to creditors and taxes. Consult with an experienced and qualified estate planning attorney for guidance
Revocable Living Trusts
Revocable living trusts are often utilized by people who want to avoid probate. When you create this type of trust you are called the grantor, or trustor. The grantor of the trust can act as the trustee and the beneficiary initially, so you do not lose control of the assets while you are alive and well. If you want to, you can dissolve the trust entirely, and it would no longer exist.
When you draw up the trust agreement, you name a successor trustee, and you name successor beneficiaries. After you die, the successor trustee can distribute assets to the successor beneficiaries in a timely manner. The probate court would not be involved.
Living trusts are often the best option for avoiding probate. Consult with an experienced and qualified estate planning attorney for guidance