4 Ways to Keep away from the Probate Activity
Probate can be a costly and long process, and cases can take years to finish. The longer a case takes, the more expensive it is—and heirs will be left with less than the deceased wished for them to have. For such reasons, most people try to avoid probate. By transferring assets independent of the probate process, the estate can save time and money, and families can save years of legal wrangling.
Jointly owned assets with rights of survivorship can avoid probate for one reason: Once the owner dies, the asset passes to the other owner. There are different ways to accomplish this goal, and the method chosen will depend on what's recognized in that state.
Joint tenancy with survivorship rights allows a surviving joint tenant to take the property in its entirety
Tenancy in the entirety: This is only an option for married couples, and it passes property to a surviving spouse
Community property laws allow married couples to hold property jointly, and to pass it all to a surviving spouse
Many kinds of financial assets allow owners to designate beneficiaries. Upon death, the assets are passed to that person, avoiding the probate process. These financial assets allow for such an arrangement.
POD (payable on death) accounts: As implied by the name, POD accounts are those with instructions that the account passes to a beneficiary upon the owner's death.
Retirement accounts allow owners to name a beneficiary of their choosing. However, spouses often have first rights to the account upon the owner's death.
Registration transferable on death allows owners to pass securities and vehicles without probate. Much like a POD account, the owner signs a statement declaring who should receive the asset upon death.
Revocable trusts occur when an owner transfers property to someone, with the right to revoke the trust. The owner can set forth that the property should be transferred to a friend or family member upon their death, avoiding probate. Trusts are formally set up, and what do probate attorneys do can help a client comply with state law.
An obvious but often overlooked way to avoid the probate1 process is to give assets away before death. This requires planning for probate, and even the most solid plan can be ruined. It's best to use gifts to give away smaller assets, and to remember that there may be a gift tax on higher amounts.