To a lot of people estate planning boils down to drawing up a will, and of course you can indeed pass along assets to your loved ones using a last will as your vehicle of transfer. The question is, should you?
The primary reason why you may want to arrange for the transfer of assets in some other manner is because a last will must pass through the process of probate. During the probate period, the probate or surrogate court in the jurisdiction that is local to you will determine the validity of the will and supervise its administration by the executor or personal representative. Many people choose to avoid probate because it is time-consuming and expensive.
Depending on the extent of your assets, the exact nature of your wishes, and whether or not your will is being contested, the probate process can take anywhere from several months to several years to run its course. From a financial perspective it can typically consume as much as 5% of the overall value of your estate, and sometimes even more.
There are a number of tools that one can use to avoid probate, and one of them that is very simple and direct is the pay on death account. Most banks and some brokerages offer these accounts, and the way it works is that you simply name a beneficiary after funding the account. Upon your death, the beneficiary assumes ownership of the funds that remain and this transfer takes place outside of the probate process. If the beneficiary has predeceased you and you have not named a replacement beneficiary, a probate of the asset would then be required.
Another way that you could pass assets to your loved ones outside of probate is through the creation of a revocable living trust. You can name yourself as the trustee and the beneficiary while you’re still alive so that you maintain control of the assets and receive the income generated from trust assets. Because there would be no assets titled in your individual name, upon your death the assets are transferred outside of probate in the manner that you set forth when you created the trust agreement.
The above are a couple examples, but you can learn more about probate avoidance and all of the strategies that are available to you by simply arranging for an initial consultation with an experienced estate planning attorney.
Latest posts by Larry Parman, Attorney at Law (see all)
- Why Crowdfunding May Cost You Medicaid Eligibility - July 16, 2019
- Beneficiary Designations, etc., Aren’t a True Substitute for a Trust - July 11, 2019
- Does a Trustee Get Paid? - July 9, 2019