Planning for what will happen to your assets after you pass away can help save a huge amount of time and money for your heirs. Smart estate planning can also help with a quick transfer of your assets according to your wishes.
NASDAQ.com's recent article, "5 Smart Estate-Planning Steps to Avoid Probate," explains that when you pass away, your possessions and property go through the probate process. This process includes the settlement and distribution of your assets in compliance with the terms of your will. Non-probate assets are those that are jointly owned by you and your spouse, like bank accounts, as well as retirement benefits and life insurance proceeds that have a beneficiary designated.
All the property you own individually and want to pass on to your beneficiaries is subject to probate, which can be tedious and time-consuming. It can take as little as three months or up to three years (or longer) to resolve, depending on your state and the size of your estate. In addition, probate can be expensive. There are bond premiums and publication fees for publishing the estate appointments. If there is any fighting over your estate, then there can be litigation costs, too. The bigger the estate, the more potential for expense. Fortunately, there are some tactics to implement now to help ensure that your estate avoids the probate process. Here are some to consider:
Draft a Revocable Living Trust. Creating a living trust allows your trustee to transfer your property and possessions to your family members without probate. You can facilitate timely distribution of assets and help your family save on inheritance fees. Talk to an estate planning attorney for help setting up – and "funding" – a trust.
Convert Your Personal Accounts To Pay-On-Death Accounts. This is as simple as completing a form designating your beneficiary, just like on your IRA. When you die, the funds are directly transferred to your beneficiary without going through probate.
Establish Joint Ownership. This property automatically passes to the surviving owner, and it's an easy way to avoid probate. Joint ownership can be established through tenancy by the entirety (between married couples) or joint tenancy. Also, community property is a way of co-owning property if you are married or own property in some states (particularly out west).
Give Away Property. Estate taxes are due only on those estates that are worth more than $5.45 million for a single person or $10.9 million for a married couple. If you have a large estate but give away enough assets ahead of time, your estate might get below that threshold and escape those taxes. If you gift property when you are alive, it does not undergo probate when you die.
Use Small Estate Laws. Many states have simplified their estate-planning procedures for certain property types, and you might be able to use this to avoid a complicated probate. This is based on the size of your estate, the type of property, and state estate laws.
Take the appropriate estate-planning measures for your situation now so that you can help simplify the distribution of your property for your heirs. Consult an experienced estate planning or probate attorney for advice on the best options for your specific situation.
Reference: NASDAQ.com (February 10, 2016) "5 Smart Estate-Planning Steps to Avoid Probate"