Many people know that they want to avoid probate, but they’re neither sure why probate should be avoided or even what probate is. To get you started, “probate” is technically the process by which the court validates a Will. However, the entire process of administering an estate is called probate, as well. If you’re like most people, you want to save money, time, and effort and keep your financial and family affairs private. If this is true, you’ll want to avoid probate.
1. The Revocable Living Trust: Often, the Revocable Living Trust is used to avoid probate. The Trust becomes the center of the estate plan instead of a Will. A Will is still used. It’s called a Pour-Over-Will and its only beneficiary is the Trust. To avoid probate, it is imperative that your Revocable Living Trust be fully funded. This means that all of your assets that were in your individual name are now in the name of your Trust. This is called transferring the title of your assets.
2. Gifts: You avoid probate on any property that you give away during your lifetime. Some folks enjoy seeing their loved ones enjoy their gifts during their lifetime. Be sure to only give away assets that you do not need. If you give away more than $13,000 per year per individual, you must file a gift tax return (the 709). Married couples can split gifts, meaning that they can give away $26,000 per year, jointly. You can gift more than this amount by paying a loved one’s tuition or medical expenses directly to the provider.
3. Joint Property: You can avoid probate by owning property jointly with someone else such as when a husband and wife own a house or bank account together. Joint property ownership is not advised with children in most circumstances. Consult with a qualified estate planning attorney to see if joint ownership in appropriate for you.
4. Contract Property: You can avoid probate by naming a specific individual as the beneficiary of contract assets such as life insurance and retirement accounts. If you name your estate, you guarantee probate. Payment on Death (POD) and Transfer on Death (TOD) accounts also are transferred by contract to the named beneficiary.
Consult with a qualified estate planning attorney if you have any questions about probate and avoiding probate.