Avoiding probate? Are we telling you to break the law? No, of course not. In fact, the exact opposite. We are asking you to take advantage of the law. Avoiding probate has numerous benefits to your estate planning. But before we dive into them, we need to first introduce and understand the probate process.
What is Probate?
Probate is the process of proving that a will is valid by a court of law. In other words, the court looks to prove that the will is the last known testament of the deceased. A will is not a self-executing document and thus needs a court to validate it.
There are three main functions of probate:
- Ensure the will is valid.
- Protect creditors. (Provides a procedure for the payment of decedent’s debts)
- Ensure beneficiaries get their inheritance.
There once was a time where all wills had to be subject to the probate process. However probate courts received a reputation of being slow, cumbersome, and expensive. Therefore, courts have permitted certain property to be deemed as non-probate property, and thus not be subject to the probate process. This allowed people who took advantage of these alternatives to probate, to save time and money.
Types of Non-Probate Assets
(1) Living Trust
Otherwise known as an “inter vivos trust”, a living trust avoids probate. Upon creating a living trust, you can place particular assets in the trust for your named beneficiaries. Because they are placed in the trust during your lifetime, they pass to your named beneficiaries immediately upon your death. However, you can also specifically state how you want distribution of the assets to occur. Maybe you don’t want your child to receive your house until he/she reaches the age of 25. Maybe you don’t want your child to receive your favorite car until he/she reaches the age of 30. Whatever it may be, a living trust allows you to avoid the expensiveness of the probate process, while also closely following your wishes.
(2) Pay on Death/Transfer of Death Contracts
There are quite a few contracts that you have surely executed in your lifetime where you are permitted to name a beneficiary, but you simply have not done so. What documents are we referring to?:
- Life Insurance Policy
- Bank Account
- 401k account
- Brokerage account
- Mutual fund
If you currently maintain any of these documents, ensure that you have named a beneficiary on them. If you do, the documents will avoid probate and save you that extra time and money.
As for a beneficiary, your job is very simple. All you have to do is provide a death certificate with the applicable company and they will subsequently transfer the account over to you.
(3) Jointly Held Property
Jointly held property will allow for the property owned to be passed immediately to the other upon death and thus avoid probate. Once the decedent passes away, anything owned in joint tenancy is owned in full by the other owner(s) and thus avoids probate.
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We hope this article was beneficial to you. If you are looking to start your own estate plan, contact your friends at JUSTLAW. Let us help you provide protection for yourself and your loved ones. With high quality, professionally drafted estate planning documents now available at extremely attractive prices, nobody should leave these critical issues to chance.