There are a lot of reasons you may want to help a loved one avoid probate after you pass away. For instance, with probate, your loved one will probably have no immediate access to your finances, including cash to pay the bills. This could be very financially draining for your loved one. In addition, the probate process can be quite time-consuming and inconvenient. Your loved one may have to take substantial time off from work to sort things out. A third reason to avoid probate is that probate is a matter of public record. Some families would much rather keep such financial matters private. The following are four ways you can help your loved ones avoid the hassles of probate after you pass away.
The best way to help loved ones skip probate is to have a revocable living trust. Under the revocable living trust, after your death, the property in the trust is not a part of your estate. Instead, whomever you designated as a trustee has control of the property. You will specify in a trust document which people you want to receive your property after your passing.
Another way to avoid probate is to set up “pay upon death” accounts, but this has some drawbacks. Under “pay upon death” accounts and registrations, certain assets, such as a bank account, will be transferred to the beneficiary you designate. Generally, checking accounts, savings accounts, and retirement accounts can all be set up as “pay upon death” accounts. All this takes is for you to fill out a simple form designating a beneficiary. Some states allow you to do the same thing with car registrations and real estate deeds. The drawback to this approach, though, is that you must keep the beneficiaries listed current. If a beneficiary dies, or you decide you do not want them to inherit, then the beneficiary designation needs to be changed. The danger is that most folks tend to forget to do this. As a result, the person you may want to inherit gets left out, or the person you did not want to inherit gets the money anyways. A living trust is a better arrangement because it can address these contingencies with a lot more detail than is permissible on the simple, fill in the blank forms that are normally used for pay upon death accounts.
A third way to circumvent probate, which is similar to the previous method mentioned, is to add a joint owner to an account or registration. Upon your death, that money or asset will be transferred directly to the joint owner. However, be careful when using this option because if the joint owner is sued, divorced, etc., those assets could be subject to the claims of creditors, divorced spouses, and other folks who you would not intend to get the money.
A final way to prevent probate is to give items away while you’re still alive. If you give an item as a gift before you die, then (obviously) it is not a part of your estate after your death, but it could still be subject to estate taxes. While this may not be the most practical solution, since predicting the exact moment of your death is impossible, it may be a viable option for someone who is ill or elderly and not expected to survive very much longer.
Your death will be a hard enough event for your loved ones without adding in probate. Probate can be costly, time-consuming, inconvenient, difficult, and a public affair. These are all things you probably want to help your loved ones avoid, especially as they will be grieving for you. Use the tips in this article to help prevent or at least mitigate probate. And the best way to avoid probate is to use a living trust.
