Probate has been one of the most prevalent state-fuelled mechanisms found in modern history. Most families undergo this process in hopes of providing further financial security in case an individual dies. Taking into account the legal fees and the court fees which go into probating, it has turned into a very expensive affair for some families.
While individuals who have high-in-value estates understandably need not worry about the expenses as much, most other families cannot bear the brunt of the expenses. Therefore, individuals who worry about the finances needed to fund probating need not invest in such a costly process. Taking into account the tedious and time-consuming process probate is, sometimes transference of property may not occur within six months. Therefore, it is better to find ways to avoid the process when, and if, it can be avoided.
Avoiding Bequeathing Property By Way of Probate
Probating is essentially taking property being held in question and distributing it in accordance to a Will. The complexities involved in probate make it a time-consuming affair more than anything. For an efficient allocation of properties to take place, it is better to remove the process altogether. Effectively avoiding probate is also one of the most important aspects of a good estate plan. To provide a more in-depth understanding of this, read the following sections related to ways of distributing property without probate.
Giving Away Property
It is not necessary to invest in a costly procedure such as probate to bequeath property. One can transfer property even before they die. Moreover, this also ends up contributing to the overall estate plan one might have.
By way of writing a living trust, what you are essentially doing is avoiding the probate process. This is because a trust contains all the property which is to be bequeathed. Upon the death of an individual, the trustee will ensure your property and / or funds will be relayed onto your designated beneficiaries. Furthermore, construction and probating of a will itself is expensive. A trust effectively avoids a myriad of costs which you would otherwise have to pay.
You can avoid probate by taking advantage of beneficiary designations, which is incumbent on owning life insurance. It is also applicable if you have kept assets in a retirement account – examples of which are IRA and 401 Ks accounts. For beneficiary designations to apply to bank accounts refer to POD and TOD accounts, which are mentioned under the following sub-heading.
Accounts Which Help Avoid Probate
Unlike trusts or giving away property before probate begins, one can try to avoid probate by way of accounts such as PODs and TODs. The mentioned accounts only transfer funds and assets upon the death of an individual, similar to how a Will functions.
This is one of those accounts which is highly contingent on the unforeseeable event that is someone’s death. It is applicable to bank & financial accounts such as IRAs. This type of an account can have a designated beneficiary, who gains access to it upon the decedent’s death.
To clarify: a POD account beneficiary has no access to the property until death occurs, which makes it more effective than joint ownership of an account. It is inexpensive, an individual simply needs to fill out details on a form given by a financial institution.
Side Note: It is possible to designate joint beneficiaries, it is not possible to appoint successor beneficiaries. For example, A and B are beneficiaries of a POD. Upon A’s death, B – as the leftover beneficiary, will not gain the funds of A.
A beneficiary designation for properties, excluding funds in financial accounts is usually termed as Transfer on Death (TOD) because what is taking place is essentially ownership being transferred. To add to the before-mentioned, all states except Louisiana and Texas have managed to introduce the Universal Transfer-on-Death Securities Registration Act for stocks, bonds and other types/forms of securities.
As mentioned earlier, probate is one of the most expensive costs one can involve themselves in when bequeathing property. Unlike living trusts, TODs or PODs, probate processes include one of the most expensive forms of fees – court fees. Imagine distributing your property through a court. This robs the personal control an individual has. Even after a person dies, the probate process will continue for years. To conclude, estate planning with your personal representative, trustee, etc. will be pertinent in saving money. Make bequeathing your properties a less tedious and expensive affair by finding ways to avoid probate.