Publish: March 8, 2020 by framestr
Probate, according to Investopedia, is a process of determining whether a will is valid and falls within the allowances of the legal framework. Probate may also refer to the executive administration of the estate of a deceased person that doesn’t have a will. When a person dies, their estate is split up among his or her beneficiaries, based on what the person’s will states. However, if no will exists, then an administrator is assigned by the court to collect the assets owed to the deceased and redistribute them to the beneficiaries. Regardless of whether a will exists or not, probate must happen before asset distribution occurs.
The downside of probating is that it can take quite a lot of time. For an individual, getting those assets to the family is of the utmost importance, and spending useless time working on probate is not beneficial to any party. There are ways to go about avoiding probate, however. Depending on the type of estate you have and how you want your estate to be shared upon your death, you can decide, while contemplating your time in home care, which of the four ways to avoid probate you’d prefer to use.
The most apparent method of avoiding probate is ensuring that you have no assets at the time of death. In theory, this is a great idea, but practically it might not be practical. Sometimes death comes unexpectedly, and no one is sure whether you will recover after a bout of severe illness. Distributing your assets before you die will ensure that you don’t have to worry about probating the estate, but you will have to find a way to survive until your death. You can utilize a particular type of trust to hold onto your assets until you die. Using this type of trust, along with other methods, can ensure that there are no probate assets available upon your death, and so there would be no need for probate to happen.
Joint ownership of a bank or investment account or the deed to a property is another way around probate. However, this method only works if the joint ownership definition is a joint tenancy with rights of survivorship (JTWROS). According to The Balance, a JTWROS is not the default state when two or more people own an asset, and it must be defined explicitly as this type of asset before it can be considered as such. There are significant downsides to this method of avoiding probate, such as:
401(k), annuities, and IRAs, as well as insurance or assets held in a retirement fund, can be designated to go to a particular individual upon your death. The method of using a beneficiary designation is one of the most straightforward ways of avoiding probate. However, in many states, an individual may be able to designate their bank accounts to be disbursed to someone specific upon their death. These systems are known as “Payable on Death” (POD). A similar method can apply to retirement accounts called “Transfer on Death” (TOD). A few states even extend the ability to transfer on death for real estate by allowing for the creation of a transfer on death deed.
As mentions in the first method, having your assets stored in a trust is one of the best ways to avoid probate. The revocable living trust, according to Smart Asset, is a written document that outlines how your assets will be distributed after you die. You can create these trusts while you’re still alive and have specifically defined clauses for when you’re alive and well, if you become mentally incapacitated, and if you die. These sections delineate how asset use or distribution will happen in each case. However, by itself, the trust won’t automatically distribute all of your assets once you die. You have to assign the assets to be distributed into the ownership of the trust, referred to as funding the trust. All unfunded assets will likely be moved to probate and have to go through the tedious process before being released.
There are only a few defined methods of avoiding the problem of probate. Each applies to specific situations, and you may have to figure out which one best suits your assets. By leveraging one or more of the methods mentioned above, you can save your loved ones the hassle of waiting months to years to get access to the thing you’ve for them.