Anyone who has ever gone through a probate court process will admit it can be an exhausting and irritating affair. But the reality is that if you lack an estate plan for when you snuff it, then your descendants and heirs have no option but to go through the process before the estate can be distributed.
There is a certain misconception that having a will simply nullifies probate. This is not true. The process automatically kicks in with or without a will, but there is a way to sidestep it if you take the necessary measures well in advance.
During the probate process, a probate court appoints a personal representative or executor to oversee the collection of the decedent’s assets, payment of taxes and final bills, and distribution of assets as stipulated in your will or the intestacy laws.
It may not be what you would have wanted and it could turn out to be more expensive, unless you took measures in advance to avoid it altogether.
Usually, there are multiple options available to distribute property without going through probate. These usually vary from one state to the other, but generally, they include:
Creating a Beneficiary Deed for Real Estate
This involves setting up financial accounts – bank accounts, Brokerage accounts, Certificates of Deposit, IRAs, 401(k) etc. – to include listed beneficiaries to whom your funds will be directly paid out to following your demise.
The asset(s) that you co-own will be automatically transferred to the surviving owner upon your death. This is not advisable if you don’t intend to bequeath your entire account to the joint owner.
These are gifts of a portion of the estate made to family members while the owner is still alive which eliminates the need to worry about future transfers.
A Living Trust
Originally established to circumvent the probate process, a living trust sees your property placed under a trust. It’s still liable to federal estate taxes, with the property being transferred to the person you name as trustee. You can choose to serve as your own trustee as long as you are able to, although you can appoint a trustee to run it on your behalf according to your wishes.
But the good thing about it is that following your death, the successor trustee still owns it which prevents it from going into probate. The appointed trustee (could be a bank or other party) can manage the estate and assets on behalf of those you name in your trust agreement (aka beneficiaries) – family, friends; charity maybe – or distribute it based on the instructions you’ve probably outlined in a will.
There is a revocable and irrevocable living trust, the former of which allows you to alter it as your wishes or circumstances change.
A living trust is the surest way to avoid probate, and establishing one has other obvious advantages in addition to the above, including control over your property, flexibility to change its terms while you are living, and the privacy to keep your matters under wraps without subjecting them to scrutiny from every Tom, Dick and Harry in court.