While you’re here, you can give your assets away – you can write a check, sign the title of your car, or execute a deed for real estate. When you’re gone, you can’t do that anymore. By creating a comprehensive plan, you can ensure that your assets are distributed according to your wishes and minimize the burdens on your family.
By using Wills, Trusts, and other techniques, we can work together to protect your estate and ensure peace of mind for you and your loved ones.
Wills: The Foundation of Estate Planning
A Will is one of the most fundamental estate planning tools. It is a legal document that specifies how your assets will be distributed upon your death, by outlining who will receive your property, money, and other assets, as well as naming an executor to carry out your instructions.
While a Will is essential, it’s important to understand that does not prevent your estate from going through the probate process. A Will must be validated by a court, which can lead to delays, additional costs, and public disclosure of your personal affairs.
Trust: A Powerful Tool for Avoiding Probate
Unlike a Will, assets held in a Trust do not go through the probate process after your death.
A Trust is a legal arrangement where a Trustee holds legal title to property for the benefit of one or more beneficiaries. The most common type of Trust is a revocable trust, which allows you to retain control over the assets during your lifetime, while ensuring they are transferred directly to your beneficiaries upon your death, bypassing probate. It can be modified or revoked at any time while you’re alive.
By transferring assets into a Trust, you can ensure that they pass directly to your beneficiaries, without the need for probate court involvement. Additionally, other types of Trusts can offer tax benefits and asset protection.
Other Asset Transfer Techniques
In addition to Wills and Trusts, there are several other strategies to help avoid probate and ensure the seamless transfer assets.
- Joint Ownership. Property held in joint ownership can be held as Tenants in Common, Joint Tenancy With Rights of Survivorship, or, for a married couple, Tenants by the Entirety. Assets that are held as Joint Tenants with Rights of Survivorship or as Tenants be the Entirety pass automatically to the surviving owner upon your death, and avoid probate.
- Beneficiary Designations. Certain types of assets, such as life insurance policies, retirement accounts (IRA, 401k, etc.) and bank accounts allow you to name a beneficiary (sometimes referred to as “pay on death”). These assets pass directly to the beneficiary without going through probate.
- Certain Deeds. Some states allow real estate to be transferred through a Transfer-on-Death deed or an Enhanced Life Estate (also known as a Ladybird Deed). Such a deed allows you to name a beneficiary who will receive the property automatically upon your death, avoiding probate.
- Gifting. Transferring assets during your lifetime, through gifts to family members or charitable organizations, will avoid probate for those assets. However, you would lose control over those assets, which might not be desirable, and you must consider potential gift taxes.
While probate isn’t always avoidable, minimizing its impact is essential to ensuring that your estate is managed efficiently and according to your wishes. Probate can be time-consuming, costly, and invasive, as it involves court proceedings.