Without a proper estate plan, you could face losing a ton of property, money and other assets after you pass away. No matter how old you are, you should prepare your end-of-life documents such as your will, advance health directive and living will, while also doing your best to avoid probate. Before we get into how to avoid probate, let’s talk about what it is and why you would want to bypass dealing with it.
What Is Probate?
Probate is the court-supervised process of settling a decedent’s estate and distributing their property to heirs. A last will does not avoid probate; in fact, a will must go through probate, which means the document must be filed with the court. A personal representative is then appointed to gather the decedent’s assets and take care of any outstanding debts or taxes. The personal representative can then distribute the decedent’s assets to the heirs.
Why Bypass It?
Gathering assets and paying off debts can take time and be costly, delaying distributions of your property to your loved ones. If you can avoid probate, and have your assets pass directly to your heirs without the involvement of the probate court, you should do it.
Top 3 Ways to Avoid Probate
- Living trust: The most straightforward way to avoid probate is simply to create a living trust. A living trust is an alternative to a last will, except that it places your assets and property in a trust managed by a trustee. It allows you to avoid probate entirely because the property and assets are already distributed to the trust.
- Joint ownership of property: Jointly held property with the right of survivorship passes directly to the joint owner still living. You can hold property jointly through right of survivorship, tenancy by the entirety, or community property.
- Beneficiary designations: Life insurance and retirement accounts including 401(k)s, annuities, and IRAs all have designated beneficiaries. These funds pass directly to the beneficiaries without having to go through probate.