The probate process involves going to court to determine whether a will is valid. Once the will is proved lawful, the assets of the deceased are distributed according to the will. Probate is a costly, complex process that requires a qualified probate lawyer to file all of the necessary paperwork.
For this reason, you may decide to set your assets up so that they can avoid the probate process. Bypassing probate helps pass more of your hard-earned assets to your heirs.
There are several different ways to bypass probate.
1. Set up your accounts as payable-on-death (POD).
A simple form enables you to label your bank and retirement accounts as payable-on-death. A POD form lets you name a beneficiary who will take ownership of the account after your death, no probate required.
The beneficiary has absolutely no access to your money while you are alive. If you change your mind, you can switch the beneficiary by filling out new paperwork.
2. Make your accounts joint property.
Accounts that are labeled as joint accounts simply pass to the joint owner when the other owner dies. Property and financial accounts can both be set up with joint ownership. It is important to note that the joint owner has legal access to the assets while you are alive. Some individuals prefer this, as they have someone who can help manage their accounts if they are indisposed.
3. Gift your property before you die.
Each year, you can give a single person $14,000, tax free, as a gift. If you are married, you and your spouse may gift up to $28,000 to one individual. Making these bestowments before you pass away removes the assets from your estate so that they are not subjected to the probate process.
When Probate Makes Sense
In certain cases, going through the probate process is beneficial. If a possible heir believes that a will is not valid, going through probate court provides an opportunity to contest the will using a qualified lawyer. A will created when the owner was not of sound mind is not valid, nor are wills written under fraudulent circumstances.
Complex estates with numerous assets and creditors can also benefit from probate. The probate process can provide guidance as to how the assets should be handled so that the estate can settle with creditors who have a valid claim to the assets.
The probate process is notorious for its complexity. Depending on your situation, it can be helpful to set up some of your accounts so that they can skip probate after your death. In other cases, probate can provide guidance for your heirs about your assets should be dispensed. Considering these matters now ensures that settling your estate is a smooth process for your heirs.