In a previous post we explained some the reasons why people choose to avoid probate, but to recap there are three basic pitfalls that go along with the process. For one, probate can be costly because there are a number of expenses involved, including court costs and the fees charged by the various probate professionals whose expertise is required.
In addition, probate can be time-consuming and the heirs to the estate will not receive their inheritances until the estate has been probated and closed. And finally, the probate proceeding is a matter of public record and it provides a venue within which interested parties may contest your wishes. Many people would prefer that their final affairs remain private while closing the door to those who would seek to challenge their wishes.
So these are the reasons why you would want to avoid probate…but how do you go about doing it? Let’s look at three commonly implemented steps.
One way that you can transfer assets to your loved ones outside of the probate process is by taking out life insurance policies and naming your family members as beneficiaries. This is a very basic and common sense strategy, but it is effective all the same.
Pay on death or transfer on death accounts are another way to get money into the pockets of your loved ones outside of the process of probate. You simply start the account at a bank or brokerage and name your heir as the beneficiary. When you pass away your beneficiary assumes ownership of the funds in the account and this exchange takes place outside of probate.
The last probate avoidance strategy that we will mention is the revocable living trust. You can fund the trust and name yourself as the beneficiary and the trustee while you are still alive, but when you pass away your successor trustee will administer the distribution of the assets to your successor beneficiaries in accordance with your wishes.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.