When you use a will as your primary vehicle of asset transfer your estate must pass through the process of probate. During this interim the probate or surrogate court supervises the administration of the estate, and this court would provide a forum for interested parties to challenge the will or question its validity. This possibility in itself is one of the reasons why many people choose to implement strategies that enable probate avoidance, but there are a couple of other very compelling reasons for doing so as well.
Most people would like to see their loved ones receive their inheritances in a timely manner, but when an estate passes through probate inheritances are not going to be distributed until the process runs its course and the estate is closed by the court. Pending on the jurisdiction this can take anywhere from perhaps nine months to multiple years depending on the complexity of the case.
There are also considerable expenses that go along with the probate process. The probate or surrogate court will charge a fee, and the executor must be paid unless he or she chooses to assume the responsibility without remuneration. The executor will have to retain the services of a probate attorney, and an accountant, an appraiser, and an estate liquidator may also be necessary and of course all of these professional entities charge for their services.
These are some of the primary reasons why people sometimes choose to avoid probate when they are planning their estates, and one way this can be done, at least in part, is through the creation of pay on death accounts.
Most banks and financial institutions and some brokerages offer pay on death or transfer on death accounts to their depositors. The way that it works is that you simply name a beneficiary to assume ownership of the assets in the account in a direct fashion upon your death. This transfer takes place outside of the probate process so your beneficiary will receive the funds that remain in the account in their entirety as soon as it becomes possible to prove to the financial institution that you have indeed passed away.
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