How to Avoid Probate
Today we are going to talk about how to avoid probate. If you don't take steps to protect your assets, everything you own will be transferred to probate. When this occurs, bank accounts and financial holdings are frozen and assets cannot be distributed to beneficiaries until the estate is properly accounted for.
The following how to avoid probate strategies can easily be implemented and require little time and effort on your part. However, implementing these strategies now can save your loved ones hours of frustration and provide them with nearly instant distribution in the event of your death
Perhaps the most ironclad way to avoid probate is by setting up an irrevocable life insurance trust. ILITs offer considerable flexibility in distribution terms; however, once terms are established they cannot be changed. Life insurance trusts offer tax advantages to both the policyholder and named beneficiaries. Setting up an ILIT requires the assistance of an estate planning lawyer.
Another popular option is to establish a revocable or irrevocable living trust. Revocable trusts allow you to retain control over your assets. An irrevocable living trust requires you to relinquish control of assets and transfer ownership to a designated Trustee. There are pros and cons to both types of trusts. Before making a decision it is advised to consult with a qualified estate planning attorney.
Establishing payable-on-death beneficiaries is a simple way to keep your bank accounts out of probate. Account holders that are married and hold a joint account, typically do not need to assign POD benefits. To be on the safe side it is a good idea to designate your spouse as the beneficiary. Single account holders can designate any beneficiary they desire. Multiple beneficiaries can be assigned as well.
To arrange payable-on-death accounts, simply ask a bank teller for the required forms. Named beneficiaries will not have access to your bank accounts while you are still alive. Upon your death, beneficiaries will need to provide date-of-death values to the tax assessor's office. Once this government agency signs the forms, beneficiaries must present the form and your death certificate to the bank in order to obtain their portion of the funds.
Property which is titled can be gifted to beneficiaries through the establishment of transfer-on-death benefits. TOD benefits can be assigned for transfer of cars, motorcycles, boats, recreational vehicles, etc. Not every state allows transfer-on-death beneficiaries. A way around this is to apply for a joint title and add the name of the intended beneficiary. Upon death, the beneficiary can present your death certificate and re-title the vehicle in their name.
Realastate can be titled jointly in order to avoid probate. Married couples who own property together should hold a joint property title. Individuals who are single can gift real estate to a beneficiary by adding their name to the title.
Finally, property and personal belongings can be gifted to beneficiaries while you are still alive. The Internal Revenue Service allows property owners to gift up to $12,000 per person, per year tax-free. Gifts larger than $12,000 require the beneficiary to file a federal gift tax return. By gifting your assets not only will you avoid probate, but you will also know that your belongings end up with the people whom you want to have them.
Learn more strategies to avoid probate and discover estate planning options in our comprehensive article library. We offer dozens of articles to help you understand the pros and cons of probate and what is involved.
If you are a probate administrator and need to sell probate assets quickly, I might be able to help. Feel free to submit information about the estate you are administering via the "Forms" page on this website. I will contact you within 72 hours to discuss available options.