Everything You Need To Know About Avoiding Probate
It’s 11 o’clock at night when you get a call: Your grandfather has passed away after suffering a stroke. Just a few short years earlier, your grandmother had passed away, leaving everything to your grandfather. But, your grandfather had yet to finish his estate planning, and there would be no avoiding probate.
The year following your grandfather’s death, instead of hopefully being a celebration of his life, becomes a very unpredictable process of your family dealing with the probate court. Your grandfather’s wishes are unclear leaving family and the courts to try and determine what should occur. The process drags on and costs eat away at the estate and assets. It finally ends too long after his, leaving in its wake the potential for misunderstandings or worse.
This is a situation many families, unfortunately, go through during times of loss. Yet, it’s completely avoidable with proper estate planning. Learning to avoid probate the hard way means watching your inheritance or the inheritance of your parents be given away by an unsympathetic court.
Celebrate a life, avoid a legal bad dream.
When most people prepare for their death, they assume that it’s just a matter of setting up a will. Although wills are an important part of the process, it does not help you avoid the probate process. Upon passing and leaving a will, the estate executor or representing attorney still must initiate probate. The court will then examine the will and validate it, authorizing the distribution of assets accordingly, including paying taxes and any outstanding debts.
This process can drag on for months and even years depending on the size and complexity of the estate. As the process drags on, the probate costs continue to increase and reduce your inheritance. It also causes delays in receiving the inheritance. More importantly, probate causes a delay in bringing your family closure. Going through the death of a loved one, whether expected or untimely, is painful for the surviving family. Burial may only bring part closure as memories are attached to the belongings of the estate now sitting in the hands of the court. It’s only in receiving that inheritance – those items that bring you cherished memories of your loved one – that you may finally receive closure.
This is why probate causes frustrations to mount and the potential for mild or heavy frustrations between family members. It’s already an emotional time, and probate adds more stress and pain to the grief-stricken family. Moreover, probate is a very public process as it’s a legal proceeding, meaning everything will be on public record. To some, this may be a benefit; to many, however, this is an invasion of privacy. Avoiding probate respects your family’s time to grieve, brings quick closure, as well as respects your privacy.
Steps To Take To Avoid Probate
Probate is not the same in every state. So, you need to be aware of those laws when planning your estate. In many cases, if there is a surviving spouse that is joint owner, everything passes to the spouse. Joint tenancy with the right of survivorship is the case for most married couples and makes the process easier, even avoiding it entirely. Setting up ownership, or proper asset tilting will help you avoid probate. Knowing your options to avoid probate will help protect your entire estate for the benefit of your family.
- Give Assets Away While You’re Still Living. As we age, we all know the inevitable end. Unless you have an untimely death, giving away assets while you’re still alive is a simple way of avoiding the probate process.
- Create A Revocable Trust Or Living Trust. When you establish a revocable living trust, your assets and property titled in that trust will avoid the probate process entirely.
- Transfer On Death (TOD) Deeds And Designated Beneficiaries. If you live in one of the states that recognizes TODs, like Minnesota, you’ll be able to set up a deed that stipulates the transfer of investment accounts, bank accounts, and other assets. It’s like a designated death beneficiary, which is also a TOD, but does not include real estate. You can, and should, designate a beneficiary on additional assets such as IRAs and life insurance policies. With a designated beneficiary or a TOD deed, you retain ownership while you’re alive. Upon passing, that property under the deed passes to the designated beneficiary.
- Create A Life Estate. In a life estate, you still maintain sole ownership of your property during your lifetime. However, you can have it set up so that the property passes to another owner upon your death. This is common with real estate where someone wishes the home or vacation home to pass to a specific person at their death.
Avoiding Probate With Proper Estate Planning
When it comes to your estate planning and inheritance preparation, avoiding probate is always in your family’s best interest. A few hours of planning, with assistance from your advisors, can avoid months (sometimes years) of a probate nightmare. Thorough estate planning will help you avoid costly and lengthy probate, protecting you and your family’s privacy and assets. At Vector Wealth Management, we believe in exploring every option that puts you and your family’s best interests first. We want you and your loved ones to get the most from your wealth and assets, and that includes proper estate planning.
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Vector Wealth Management is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.