Estate Planning Secrets: How To Avoid Probate
Russel Morgan08:20am EDT Estate Planning & Probate Lawyer. Founder of Morgan Legal Group, P.C. Represents individuals & major corporations in all essential matters. Probate is known for being an unnecessarily complicated and lengthy procedure. Even when the estate being probated is fairly simple and straightforward, proceedings can go on for some time, depending on different factors. With larger estates or those riddled with legal issues, probate can take well over a year to complete. In addition, estates that are submitted to probate often end up losing a significant portion of their value through estate taxes, court and attorney fees, and other expenses. If you wish to learn more about how to avoid having your estate caught up in the probate process, this post will cover estate planning methods that you can use to secure your assets. Be sure to discuss these with your estate planning attorney to determine what estate planning tools will work best for you.
Transfer-Upon-Death Accounts One of the easiest ways to protect certain assets from being submitted to probate is by converting them to what are known as transfer- or payable-upon-death accounts. This is an effective option to use for estates that are primarily comprised of financial accounts. A transfer-upon-death account works by appointing a beneficiary to be the designated recipient of the funds held within an account in the event of the account owner's death. Most states permit beneficiaries to be listed for bank accounts as well as retirement accounts. A few states also allow transfer-upon-death arrangements to be made for vehicles or real estate property.
Joint Ownership Joint ownership is another estate planning tool that can be implemented to bypass probate. As the name implies, joint ownership refers to the ownership of a property by two or more people as indicated by a proper title. Should one owner of a property pass away, the property will automatically go to the other owner. In order for joint ownership to work in avoiding probate, it is extremely important to ensure that the property title includes both owners. This will secure the property, as its ownership transfers by default upon the death of either title holder. The most common forms of joint ownership include: • Joint tenancy with right of survivorship • Tenancy by the entirety • Community property with right of survivorship
Revocable Living Trusts A revocable living trust is a legal document that is created during your lifetime and determines how your property will be distributed upon your death. A revocable living trust includes the provision that you may modify or cancel its terms at any time. However, simply creating a trust will not suffice to protect your assets from probate. The secret is that whatever assets of value you have need to be placed within the trust so that the trustee becomes the owner of those assets instead of you. In the event of your death, the trustee can then transfer the assets directly to any beneficiaries you have designated within the terms of the trust. Because these assets no longer form a part of your estate and are no longer under your ownership, they will not need to go through probate.
Gifts Another method to avoid having to probate your finances and assets is through gifting. Giving some of your property and assets to a family member, loved one or organization means that those gifts are removed from your estate and subsequently do not have to be submitted to probate as they no longer belong to you. Also, gifting assets of significant value lowers the cost of probate. Assets with high monetary value can raise probate expenses as well as overall estate taxes. Making a gift of these valuable assets can relieve some of these costs. It should be noted, however, that the annual gift tax exclusion amount is currently set at $15,000. This means that you can gift up to $15,000 a year per person without being required to file a gift tax return. Exceeding this amount would require filing a gift tax with the IRS. Whether your estate is large or modest, these options are available to you and can help you avoid getting your estate stuck in probate. Avoiding probate isn't as difficult as it may seem — it simply requires knowing a few estate planning secrets. The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.