Don’t Get Trapped By Probate
🚀 The quick version: Recent research shows that 64% of Americans think it's very or somewhat important to have an estate plan, but only 34% actually have one.
The result is that most families who have a loved one pass away wind up dealing with a lengthy and exhausting process know as probate.
Probate is the legal process through which a deceased person's assets are distributed to their beneficiaries. It involves validating the deceased's will, paying off any outstanding debts or taxes, and distributing the remaining assets according to the instructions outlined in the will. If there is no will, the court will determine how the assets are distributed based on state laws.
The process can take years and cost thousands of dollars leaving many families in limbo.
👪 How it affects your family: Even if you don’t think you have enough assets to need a plan, you should at least (just once) consult an estate attorney for extra details (for example, the cut off for probate in our home state of Florida is just $75k of assets).
However, there are a few steps you can take today:
Have a small estate. Most states set an exemption level for probate, offering at least an expedited process for what is deemed a small estate. In some cases, "small" actually can be quite large. Google your state's probate estate limits and consider giving assets to family before you die (a convertible 529 for kids can be a great option). This tactic might also trim or even eliminate future federal and state estate taxes.
Establish a trust. Don’t worry, it’s not as complicated as it sounds and it will ultimately cost less than probate court. Property held in a trust is not considered a part of your estate upon your death, therefore it typically avoids probate court. A trustee, not you, controls the trust property and is obligated to distribute it under the terms of the trust agreement (know the difference between a will and a living trust).
Make accounts payable on death. This is a big one and common issue. If you have any bank accounts just in your name, call them up today and make them payable to someone on death. Bank and other accounts that are payable on death go directly to your designated beneficiary without going through probate, as do life insurance policies with named beneficiaries. Some states also allow such transfers of real estate, called transfer on death deeds. Without doing this your loved ones may not even have access to your bank account when you die.
Own property jointly. Making your spouse or someone else a joint owner facilitates the transfer of the asset without the need for probate. Some ways to hold such assets include joint tenancy with right of survivorship, tenancy by the entirety and community property with right of survivorship.
