Have you ever wondered why the holidays are considered the season of giving? Though you receive a lot of gifts, you also give them. The religious aspects of the holiday season (no matter what religion you are) often inspire people to give back to those who are less fortunate, including them in their giving as though they were their own family members.
The season of giving might have you thinking about your assets and what you want to do with them after you die. You don’t want them to be stuck in probate court, where they’ll be divied up to your creditors, instead of your family. There are ways to transfer your assets now that will not only protect them, but will also give your heirs the gifts they deserve.
What is Probate?
Probate is a legal proceeding overseen by a judge. The main goal of probate is to satisfy your debts after you die. This means that your assets will go to your creditors, as opposed to your family. Probate court can be avoided, through tools that we will discuss here. These tools include: trusts, joint ownership of real estate, P.O.D. accounts, and small estate provisions.
When you think of estate planning, you likely think of a last will and testament. However, that is far from the only option for asset transfer. A living trust, also known as a revocable living trust, is a document that creates a legal entity separate from you. You transfer title to an asset into the trust, and you or someone else becomes the trustee. The trustee transfers title to the beneficiary (the person you want to get the asset after you die) at a designated time.
A revocable trust can be revoked, while an irrevocable living trust, which is often used for Medicaid planning, cannot. The cost to set up a trust is not cheap, but these legal fees are often less than those of probate. It all depends on the complexity and value of your property.
Joint Ownership of Real Estate
Property that is jointly owned with the right of survivorship can avoid probate. This means that when one owner dies, the property passes to the other owner, who has survivorship rights. The property needs to be retitled as jointly owned with the right of survivorship. A new deed might even have to be recorded to delineate survivorship intention; otherwise, it won’t be clear what type of property it is supposed to be, and the estate will end up in court.
Bank and financial accounts often allow the holder to designate a beneficiary in the event that they die. This type of account is called a “Pay On Death” (P.O.D.) account. This is far preferable to jointly owning the account, as the P.O.D. beneficiary won’t have any rights until you die, so you won’t have to fight for control while you’re alive. Setting up a P.O.D. account usually isn’t overly complex. You just fill out the form provided by the financial institution, sign it, and, when you die, the beneficiary gets your funds and your account is closed.
Small Estate Provisions
There are ways to avoid probate court if you have a small estate. Most states have these provisions in place. In Florida, you can use a simplified estate process if you have no real estate. Also, all property must be exempt from creditors’ claims, save for amounts necessary to pay for funeral costs and the illness expenses of the last two months before death.
These are far from the only ways to avoid probate, but they are some main ones that you’ll likely run into at some point. Contact an estate planning attorney to discuss more options for asset transfer.