Probate is the distribution of an estate after someone has passed away. It is usually a lengthy and expensive process that can cut into the value of the estate and cause a lot of stress for family members in the months or years after a death while everything is being sorted out.
For this reason, people are often advised to avoid probate at all costs. But is it always a good idea to avoid probate? Here are some things to consider about your avoidance options.
Planning ahead: To avoid or not to avoid
One of the most important pieces of estate planning is, as the name would imply, planning. Whether you want to avoid the probate process or not, you must plan ahead. This doesn’t just mean making a decision one time and calling it good. It involves adding new assets to your plan as you go. As you acquire new property throughout your life, it must be incorporated into your plan of who will inherit it.
So, should you plan to avoid probate?
Before you decide for sure, ask a local estate planning attorney whether your estate is exempt from the process. Sometimes you will automatically be waived past the probate process. There is also a possibility that your probate process would be very simplified, in which case it may not be worth the cost and effort of avoiding it altogether.
If you do decide to avoid it though, it’s important to know what each option entails so you can plan accordingly.
Revocable living trust
A revocable living trust allows you to place your property title under the trust name and retain control of it, but then automatically transfer it to a beneficiary when you pass away. The automatic transfer of ownership foregoes the complications of probate, but there a few things to keep in mind.
Firstly, a living trust does not replace a will. You still need to write a will to cover your wishes for all of your estate, even if your trust has a named beneficiary. There is also an initial cost for creating a living trust, so weigh the benefits of a trust against the cost before creating one.
When property is owned under a joint tenancy, the surviving co-owner after a death automatically claims full ownership. Similar to a trust, this avoids the need to sort out who owns your property after you’ve passed. However, like a trust, this does not replace the need for a will. If both owners die without a will in place, all of their assets will go to other heirs decided by court.
Naming a beneficiary
Many assets besides trusts can have a designated beneficiary who will automatically become owners of that asset when you pass away. Because they are immediately considered the owners, the assets are no longer part of your estate and aren’t subject to probate.
Keep in mind though: If you are married, your spouse may have some or all of the rights to your property.
Gifts should generally only be considered for smaller assets, but they allow you to pass pieces of property on before you pass away. The obvious downside to this is that it must be planned well in advance and must be given before you pass away. However, it is an option for distributing pieces of property that will not need to be considered for probate later.