No one wants to deal with costly probate, especially when struggling to deal with the death of a loved one. Believe it or not, if you plan ahead, you will be able to minimize, or even completely avoid probate costs. The following are some ways to lower or deter the cost of probate, to make things easier for your loved ones after your passing.
1. Set Up A Living Trust
The simplest and most efficient way to avoid expensive probate, is to set up a living trust. This would be in addition to your Last Will and Testament. A living trust will designate a trustee to distribute your assets according to your terms after your death, whereas a will simply dictates how the probate court may distribute the assets. By appointing a trustee, you will have the peace of mind that your exact terms will be followed. Make sure to fund your trust by transferring all of your assets and properties to the trust.
Remember, a trust will deter the cost of a probate. With a will, the costs of the probate will be deducted from the overall estate amount thus leaving less money for your beneficiaries.
2. Add Beneficiaries to Your Various Accounts
If you have any life insurance or retirement policies such as 401(k)s or IRAs, you need to designate a beneficiary. This will deter any probate expenses. Also, most states now allow you to appoint a beneficiary for your bank accounts. This is most commonly known as a “POD,” or “payable on death” account. For those accounts or investments that are non-retirement accounts, you can also set up “TOD” or “Transfer on Death” accounts.
Check to see if your state offers the option to allow you to designate a beneficiary for your real estate properties. These are done via transfer on a death deed (or often beneficiary dead) or even an affidavit. Other states will allow you to use an estate deed to pass the property onto your chosen beneficiary without the need for probate.
You should be able to acquire the forms from your bank to designated account beneficiaries. For insurance and retirement accounts, you need to contact the company with which you have the policy.
3. Consider Joint Ownership on Your Properties and Assets
Simply adding a joint owner to any of your accounts, assets or deeds can avoid the probate process. Of course, proof of joint ownership must be provided. In some states, both spouses can share ownership of both tenancy and property.
However, joint ownership to a deed or other asset will then require the deed or asset to be subject to taxes or listed a taxable gift, which must be filed as an IRS 709 form when filing for a federal gift tax return.
4. Disperse Your Assets Before Your Death
A surefire way to avoid the cost of probate after your death is to get rid of all of your properties as soon as possible. Of course this both extreme and impractical as it will not leave you with anything while you are still alive.
As you can see there are multiple ways to avoid, or decrease probate costs after the time of your death. If you need help figuring out which method is best for you, it is best to seek legal advice. Please feel free to contact our office for expert advice regarding estate planning or probate costs.
Need help setting up a living trust? Contact us today for a free consultation.