Probate is a complicated and time-consuming legal process of distributing a deceased person’s assets and settling his or her debts.
If you want to spare your loved ones the hassle of probate, you should understand how to create an estate plan that provides a smoother transition of your assets after your passing.
Create a living trust
Did you know that only a minority (46%) of Americans have drafted a will, much less completed a full estate plan with a living trust? A living trust is a legal document that allows you to transfer your assets to a trust during your lifetime. Then, when you pass away, your trustee distributes your assets to your chosen beneficiaries according to your trust’s instructions.
Joint ownership is another way to avoid probate. For example, if you own a home with your spouse with the right of survivorship, the property automatically passes to your surviving spouse upon your death. However, joint ownership can have tax implications and may not be suitable for all types of assets.
Designating beneficiaries on your financial accounts, such as retirement accounts, life insurance policies and bank accounts, prevents the need for probate. When you pass away, these assets are directly transferred to the named beneficiaries. You can also set payable-on-death or transfer-on-death accounts for your bank or investment accounts.
Minimize personal property
Reducing the amount of personal property that needs to go through probate can simplify the process. You can reduce your probate estate by giving gifts or providing for inheritances while you are still alive. By gradually transferring assets to your loved ones, you can reduce the value of your estate.
Avoiding probate is possible with careful planning and implementing the right legal strategies.