Avoiding Probate With Your Estate Plan

Help Your Heirs Avoid the Probate Process

When it comes to developing your estate plan, it's important to find ways to make the distribution of your estate easier on your heirs. And in many states, you may be able to simplify the process by taking steps to avoid probate court. Unfortunately, just having a will does not accomplish that goal.

What is probate?
Your probate estate
Tools to help you avoid probate

What Is Probate?

Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion when you die. The probate court oversees payment of liabilities and the distribution of assets after your death. Generally, your estate's executor will need to employ an attorney.

Probate proceedings vary from state to state. Though some states have simplified the process, probate can remain time-consuming, costly and public.

Your Probate Estate

Legal title usually determines whether an asset is part of your probate estate. For example, your probate estate includes non-trust assets held:

In single name
As tenants in common
As community property

Your attorney can help you identify which of your assets are required to go through the probate process.

Tools to Help You Avoid Probate

You have several estate planning strategies that can help your beneficiaries avoid probate court. The ones discussed below are not suitable for everyone. You should contact your qualified tax and legal advisors for helping in determining which strategy is best for your specific situation.

Ownership/titling. As stated above, assets held in single name, as tenants in common or as community property are required to go through probate.

Assets held in "joint tenants with rights of survivorship" let you share an undivided interest in property during your lifetime. At the death of one owner, the property avoids probate by automatically transferring to the surviving owner(s).

However, titling your assets this way does have limitations as an estate planning tool. You should discuss the advantages and disadvantages of titling your assets as "joint tenants with rights of survivorship" with your tax and legal advisors.

Beneficiary designations. Assets with beneficiary designations, such as annuities, life insurance, and retirement plans, generally avoid the probate process when they pass to your heirs. Keep in mind, beneficiary designations take precedence over any other instructions you provide in a will or trust.

Revocable living trusts. Trusts are often used to solve problems that other forms of ownership cannot. While there are many types of trusts that can help you meet different estate planning goals, the revocable living trust is one that is commonly used as a way to avoid the probate process.

A revocable living trust lets you maintain full control of trust assets while you're alive and competent. At your death or incapacity, your designated successor trustee steps in to manage or distribute your assets as you direct in your trust document.

Learn more about using trusts.

Transfer on death account. Transfer on death accounts can provide your heirs a simple, convenient and inexpensive way to avoid the costs and delays of probate while letting you maintain sole ownership of your assets during your life. The transfer on death account has limitations as an estate planning tool, so you and your tax and legal advisors should carefully evaluate the pros and cons of this strategy. Ask your financial consultant for more information about transfer on death accounts.

Note: Bancoii does not provide legal, accounting or tax-preparation advice. You should consult your tax and legal advisors for your specific situation.