Avoid Probate: Five Ways to Protect Your Assets
Why avoid probate? If you do not make arrangements for your assets before you die, everything you own will be transferred to the Probate Court. A Trustee or Estate Executor will oversee your estate and everything must be approved through a Probate Judge. The process can take months, if not years to complete. Filing a Last Will and Testament will not prevent your estate from the probate . However, filing a Will typically shortens the process.
You can easily avoid probate and have your assets distributed according to your wishes by taking time now to plan ahead. The following suggestions can help avoid probate altogether or prevent certain assets from being included in your estate.
The primary method to avoid probate altogether is setup a Revocable Living Trust. A living trust is managed by a Trustee. Most people assign their self as the Trustee and designate an individual to take over upon their death. All property held in a revocable living trust is not considered part of the estate and thereby avoids probate. Certain restrictions apply, so it is best to consult with a qualified estate planner.
Payable-on-death (P.O.D.) is a simple and effective way to distribute funds in your checking, savings and retirement accounts. If you have a joint account with your spouse, the money normally transfers to your spouse and will avoid probate. To be on the safe side, request a POD form from the bank and assign your spouse as the beneficiary. Individual account holders can designate any beneficiary. Upon your death, the beneficiary must present your death certificate before accessing funds.
Transfer-on-death (T.O.D.) can be used to transfer automobiles, motorcycles, watercraft and recreational vehicles. Similar to P.O.D., you can name a beneficiary to receive your property in the event of your death. Not all states allow transfer-on-death beneficiaries. If your state does not, you can add the name of the beneficiary to the title of the vehicle. Make certain to ask for a joint title. Otherwise, the beneficiary could take possession of your vehicle before you die. In order to take possession, the beneficiary will have to present your death certificate.
If you are married, joint ownership will avoid probate for real estate property. With joint ownership, upon your death your spouse automatically inherits the property. If you are single, you can bequeath real estate to beneficiaries by adding their name to the property title.
Last, but not least, you can give away property and personal belongings while you are still alive. Not only will gifting your assets avoid probate, it will ensure that your real estate and personal belongings end up with the people you wish. The Internal Revenue Service allows individuals to gift up to $12,000 per person, per year. If you give more than $12,000 to any one person in a calendar year, you are required to file a federal gift tax return.