While some see probate as a necessary evil, there are ways to avoid this time-consuming and expensive process. And if you do it correctly, you can also ease the stress on your loved ones as well. Here’s a few ways to bypass probate.
A Revocable Living Trust is the most effective way for your family to avoid probate after your death. You can place all of your holdings into your trust, and during your life you will be the trustee. At your death, your trust will pass to your chosen heirs. This document, when properly maintained, allows all property included in it to skip the lengthy process of probate.
Did you know that you can make your banking and retirement accounts “payable on death”? Payable-on-death designations on your banking accounts allow you to designate a beneficiary to receive that particular asset. This allows your money to go straight to your loved ones without passing through the court system.
Depending on how joint property is documented, the remaining property owner may be able to evade probate at the death of the other owner. Joint tenancy with rights of survivorship is one way to allow a piece of property to pass straight to the surviving property owner. Tenancy by the entirety is a version of survivorship joint tenancy for married couples or in some states for same-sex couples. Both of these options may be used in common law states. In community property states, the designation of community property with the right of survivorship is used to skirt probate.
Gifting pieces of your estate during your lifetime is another way to pass it to your heirs without probate and also to help your loved ones avoid hefty taxes. You can gift up to a certain amount of your property to your family members each year – $13,000 in 2010 – without them having to pay taxes on it. When they already own the property at the time of your death, it cannot be included in the probate process or your estate taxes.
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