I would like to thank the law firm of Folsom Probate Law, their Folsom probate Attorney clearly explained the ways in which to avoid probate. Hint, Trust me it is easier than you think. In most cases, probate is simple to avoid, and yet lots of people fail to do so. Below you will discover a list of the four ways to avoid probate. What will work in your situation will depend on how your properties are titled and who you wish to acquire your estate after you pass away.
Probate #1 – Get Rid of All of Your Property
The most extreme way to prevent the probate of your estate is to eliminate all of your property because without any property you will not have an estate that will require to be probated. Naturally, this really isn’t practical considering that you will need money to live on till your death, but in particular cases providing the majority of your properties away through the use of a special type of trust of which you can be a beneficiary might make good sense. Utilizing this type of trust integrated with one or more of the other strategies explained listed below for any assets that are not moved into the trust will imply no probate possessions, and therefore no probate estate.
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Probate #2 Use Joint Ownership With Rights of Survivorship or Tenancy by the Entirety
Adding a joint owner to a checking account, financial investment account, or to the deed for real estate will also avoid probate, offered that it is clear that the account is owned as joint renters with rights of survivorship and not as renters in common. If you are married, then in specific states you and your partner can own property with rights of survivorship in the form of tenancy by the whole.
There are, however, numerous disadvantages to relying on joint ownership with rights of survivorship or tenancy by the entirety to avoid probate:
Oftentimes including a joint owner to an account or deed will be a taxable gift that needs to be reported to the IRS on a federal gift income tax return (IRS Form 709).
If a joint owner is sued or gets separated, then a judgment lender or divorcing spouse might have the ability to take some or perhaps all of the possessions in the joint account.
If a joint owner passes away prior to you do, then 50% and even 100% of the joint account could be consisted of in the departed owner’s estate for estate tax functions.
If you are in a second or later marriage, leaving your property to your partner by right of survivorship or tenancy by the totality will mean that your partner will be complimentary to do whatever they desire with your property after they pass away. In other words, you may desire your spouse to have usage of your property after you die, but then after your spouse later on dies you might want your property to go to your own children.
Usage Beneficiary Designations
If you own life insurance or properties kept in a pension such as an IRA, 401( k), or annuity, then you are currently benefiting from probate avoidance through making use of beneficiary classifications. What you may not know is that most states allow you to designate recipients for your savings account (this is referred to as a “payable on death” or “POD” account), and likewise for your non-retirement investment accounts (this is described as a “transfer on death” or “TOD” account). In addition, a handful of states permit you designate beneficiaries for your realty through using a transfer on death deed– or beneficiary deed– or affidavit.
In other states, you can utilize a life estate deed to keep ownership of realty during your life time and then pass the property onto the recipients of your choice after you pass away without the need to probate the property.
Use a Revocable Living Trust
A revocable living trust is a written contract which covers three stages of your life:
While you live and well
If you end up being psychologically incapacitated
After you pass away
However signing the revocable living trust arrangement by itself is not enough to avoid the probate of your property after you die. Instead, once the trust contract is signed, you will require to take your possessions and title them in the name of your trust. Just after your revocable living trust has ended up being the record owner of your properties– instead of you– will the properties avoid probate.
This is called moneying the trust, and if you visualize your trust as a pail, then you need to fill the pail with your assets in order to make sure that the properties will prevent probate after you pass away. If any of your properties sit outside of the trust (pail) at the time of your death, then the unfunded assets will need to be probated unless they have a beneficiary classification or are owned with rights of survivorship by someone who survives you.
The Bottom Line on Avoiding Probate
As you can see, there are only a limited variety of methods to avoid probate. What will really work for you will depend on your own unique family and monetary situations. The bottom line is that by using several of the strategies described above to prevent the probate of your property, you will be developing comfort for you along with assurance for your enjoyed ones throughout a hard time.