How Does Estate Planning Help Avoid Probate?
You’ve worked hard all of your life. As you enter your golden years, you’d obviously like to leave something for your children or others you love. In order to avoid the legal hassles of probate court, you’ll want to do some estate planning before you die, so that the transfer of your assets to your heirs is smooth and trouble-free.
Write a Living Trust
A living trust is the best way to avoid probate, especially if your estate is large or there are many beneficiaries. A revocable living trust means you can change it at any time, and an irrevocable living trust means you give up the right to change it. A living trust places all of your assets into a trust. You control the trust while you’re still alive and able, and a beneficiary assumes control of the trust upon your death. Since your assets and property are technically already distributed, probate is unnecessary.
Name Beneficiaries on your retirement and bank accounts
If you have life insurance policies, you’re already familiar with appointing beneficiaries. What many people don’t realize is that you can also appoint beneficiaries for your bank and retirement accounts. All you need to do is request payable on death forms from your bank or brokerage firm.
If you’re married, your spouse will get these accounts. However, it’s always a good idea to plan for the worst, and if you both die at the same time, naming beneficiaries will help avoid probate.
You can leave mutual funds, stock options, 401(k)’s, and annuities to a beneficiary. If you like, you can name a charity as a beneficiary of an account, or a percentage of an account. This will help preserve the peace in your family after you die since your wishes are clear and spelled out.
Hold property jointly
If you and your spouse own a property jointly with the right of survivorship, the property will automatically pass to your spouse without having to go through probate.
Property is titled in one of three ways: sole ownership, joint ownership, or title by contract. Solely owned properties will go through probate upon the owners’ death. Joint properties with the right of survivorship will automatically pass to the surviving spouse. Title by contract is when you both name a beneficiary to receive the property after you die.
What happens if there’s an accident and both you and your spouse die at the same time? If you have a title by contract and a beneficiary named, it passes to that person. Where it gets tricky is if one spouse dies before the other—this would mean the surviving spouse controls the property and therefore, their heirs get the property.
Say John and Mary have enjoyed a second marriage to each other, and each has two children from previous relationships. John and Mary get into a car accident. They own their home through joint property with right of survivorship. If they both die at the exact same time, their children will probably fight over who gets the property and will have to go through probate.
If, however, John dies at the scene and Mary survives until she gets to the hospital, Mary would be the sole owner of the property when she dies, and her heirs get the property. This would leave John’s children out of the equation entirely.
Other accounts
The easiest way to avoid probate is to name beneficiaries on your vehicles, securities, and other accounts. You can do this by filling out a Pay-On-Death form, or, in the case of titles on property, Transfer-on-Death.
Estate planning is a great idea to both avoid probate, and to prevent fights and family conflicts over the deceased intentions. John Miller, our founding attorney, created Rock Solid Law to focus on the unique needs of the Jacksonville and Beaches area business community. For over 30 years Rock Solid Law has provided expert guidance and advice to clients in the areas of Estate Planning, Trusts, Wills & Probate, Real Estate: Residential & Commercial, Closings, Title & Escrow, and Small Business Representation.
If you have questions about estate planning, contact John Miller to help you.