The bad news: When a deceased person’s estate (which is simply a term referring to all of their money and property) has to go through probate (the court-supervised process of distributing a deceased person’s money and property), it can be subject to a variety of costs stemming from attorneys, executors, appraisers, accountants, courts, and state law.
Depending on the probate’s complexity, fees can run into tens of thousands of dollars.
The good news: many of these probate costs can be reduced by avoiding probate altogether. Here are three simple ways to reduce or eliminate costs (and time) by avoiding probate:
Name a Beneficiary.
The probate process only applies to those accounts or other property that are in your name at your death. By naming a beneficiary, these accounts and other property will be transferred to the named individual without any court involvement. Depending on your states, common beneficiary designation assets include:
- Life insurance
- Retirement plans
Caution: When someone is named as a beneficiary of an account or piece of property through the use of a beneficiary designation, he or she will receive that account or property outright, which could subject the account or property to claims asserted by the beneficiary’s creditors or “evil spouse.”
Create and Fund a Revocable Living Trust (RLT).
Once an RLT has been created and you have properly transferred the ownership of your accounts and property to the RLT by re-titling them into the name of the trust, you remain in charge of all legal decisions until your death. You also retain the enjoyment of those accounts and property as the current beneficiary. After your death, your successor trustee will manage and distribute your assets – according to your wishes. A trust works well if it is properly created and funded by an experienced estate planning attorney.
Own Property Jointly.
Probate can also be avoided if the property you own is held jointly with a right of survivorship. Like a beneficiary designation, joint ownership has the effect of automatically transferring the ownership upon your death. There are several ways that you can establish joint ownership of property:
- Joint tenancy with right of survivorship – ownership simply transfers to other tenants upon your death;
- Tenancy by its entirety – a form of joint tenancy with a right of survivorship, but only for married couples in some states (including Virginia);
- Community property – property obtained during a marriage in some states;
State laws play an important role here. We can help you determine which form of joint ownership, if any, is a good fit for you.
Caution: Just as with a beneficiary designation, adding a joint owner to your accounts or property can subject the accounts or property to claims asserted by the new joint owner’s creditors or spouse. Moreover, this vulnerability begins the moment they are added. This means that your accounts or property could be seized by your new joint owner’s creditors even while you are still alive.
Have questions? We can help.
Contact the Davis Law Group office today to schedule your appointment to discuss the right strategy for you and your estate. As an added convenience for our clients, we are available to hold our meetings through video conferencing or by phone if you prefer. We are here to help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.