Written by Kirsten Howe, Attorney at Law
In recognition of National Estate Planning Awareness Week, we are sharing four important tips to help you avoid probate. Probate is a legal process used to pass a deceased individual’s assets to heirs and beneficiaries of the deceased. Probate must be initiated whether an individual dies with or without leaving a will, a document that aids the court in determining how property and assets should be disposed. The probate process can be a lengthy, costly and complicated even when the deceased has a valid will accepted by the court.
Many people want to avoid the time, expense, and red tape presented by the probate process while ensuring their assets pass according to their wishes. Here are four general ways to avoid the headaches of probate:
1) Joint Property Ownership.
Jointly owned assets are not a part of an individual’s probate estate. When you jointly own property with another person such as a spouse, ownership passes to the surviving joint owner upon the predeceasing owner’s death. There are three common ways to create this, which include joint tenancy with a right of survivorship, tenancy by the entirety and community property.
2) Trusts & Living Trusts.
A second way to avoid probate is through a trust. Because the law considers trusts to be a type of contract and contracts are not subject to probate, assets disbursed through trusts avoid probate. A living trust is set up during the person's lifetime but can contain instructions for the distribution of assets and property after death.
3) Use of Beneficiaries
. Many financial assets such as payable-on-death accounts, certificate of deposit, life insurance, retirement accounts, and some bank accounts allow you to keep money—even a large amount of it—out of probate by designating a beneficiary on the paperwork who will automatically receive the asset or account balance upon your death.
4) Gifts During Life.
Because the probate process is only concerned with property owned by the decedent at death, the last way to avoid the probate is to gift property and assets during your lifetime. While this may seem simple, this does require some planning and consultation in order to avoid federal gift taxes imposed on the donor when he or she gifts assets and property in excess of the annual federal gift exclusion to an individual. For 2016, the annual federal gift limit was $14,000. For example, you and your spouse could each gift your grandchild $14,000 for a total gift of $28,000 without incurring gift tax.
Taking advantage of these four tips will help reduce the time, expense, and most importantly, emotional toll, of the probate process. We recommend planning ahead and consulting an estate planning professional to learn more about getting your affairs in order today.
Kirsten Howe’s practice focuses on estate planning, elder law and closely related areas and is based in Walnut Creek. She is dedicated to designing and implementing customized plans, and establishing close, long-lasting relationships with her clients. To learn more, visit her online at www.kirstenesq.com.