7 Ways to Keep Your Estate from Landing in Probate, #224
In some states, probate is avoidable. However, in many states, you can avoid having your estate go through the probate process. I recently went through the probate process when my grandfather passed away and I helped my father settle his estate. It is far easier for your family to settle your estate once you’re gone if it doesn’t go through probate. So, in this episode, I’ll cover 7 things you can do to keep your estate from landing in probate.
You will want to hear this episode if you are interested in...
[1:57] Settling my grandfather’s estate
[4:06] Tip #1: Give things away while you’re alive
[5:50] Tip #2: Own your real estate jointly
[7:16] Tip #3: Joint ownership for non-real-estate
[9:43] Tip #4: Use a “Payable Upon Death” account
[11:46] Tip #5: Designate beneficiaries on accounts
[13:07] Tip #6: Designate a beneficiary for vehicles
[13:52] Tip #7: Create a living trust
[16:27] Probate is unavoidable in many states
Tip #1: Give things away while you’re alive
If you reduce your estate, there’s less money to be dealt with upon your death. And in many states, the larger your estate, the higher the probate fees. You can gift up to $18,000 per year per person without reporting it to the IRS. If you give over $13 million, you’ll have to pay gift taxes. It may even be more impactful to gift money to loved ones when they need it most.
Tip #2: Own your real estate jointly
Real estate is typically an asset that has to go through probate. One way to avoid this is to put a joint tenant on the asset (spouse, child, or whoever you want to have the property). You want to set up a Joint Tenants and Rights of Survivorship. This gives them equal ownership of the property and it would go to them upon your passing. Listen to hear what the downsides might be.
Tip #3: Joint ownership for non-real-estate
Bank accounts, investment accounts, mutual funds, etc. can also have a joint tenant. It would make the most sense to leave this to your spouse. When you pass, they simply have to complete some paperwork to have the asset(s) moved to their name. If you don’t have a joint owner or beneficiary designated, all of these assets would move into an estate account. Your executor has to settle with any creditors before the estate can be paid out. It took a year to go through this process with my grandfather’s estate.
Tip #4: Use a “Payable Upon Death” account
With these accounts, when you add someone as a beneficiary, they don’t have access to the account during your lifetime. Upon your death, they are a beneficiary. They usually just have to provide a death certificate and fill out some paperwork and the asset becomes theirs. It’s a great alternative to a joint tenant account. This can be done with many different types of accounts.
Tip #5: Designate beneficiaries on accounts
You can easily add beneficiaries to retirement accounts, annuities, and life insurance accounts. This is something I always review with clients. I also recommend adding a contingent beneficiary (child or family member). If something happens to your primary beneficiary, the assets go to the secondary beneficiary versus through probate.
Tip #6: Designate a beneficiary for vehicles
This is often overlooked. If you own a car or other types of vehicles, you can designate a “Transfer Upon Death” beneficiary. 20 states—including Connecticut—allow this. It’s one less asset that would be pushed into probate upon your passing.
Tip #7: Create a living trust
In some states, this can help you completely avoid the probate process. In others, like Connecticut, it can simplify the process. It’s a trust that you can set up which names where you want your assets to go and how they’re going to be distributed. It can be set up by many online companies or by hiring an attorney who specializes in estate planning.
Secondly, once a trust is drafted, you have to put assets in it. That means you have to retitle bank accounts, investment accounts, real estate, etc. in the trust name. It does require extra steps.
Resources Mentioned
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