What is Probate?
Probate is a formal Legal process, more specifically, a Judicial process whereby the Will of a person who has died is recognized by a court of law. Executors or Personal representatives are then appointed by the court to distribute the property/assets among the beneficiaries. Everything is done here under the supervision of the Court of Law and this process requires a lot of patience, time, and money.
This involves organizing the money, assets, and possessions of the dead person and after paying any taxes and debts, they are distributed as per the instructions in the Will.
If you have a Will, your Executor will not readily have the authority to administer or distribute your estate among your beneficiaries, your executor will first need to apply in the court to start the probate process. Once the process is completed, then only the Executor will have the right to distribute your estate as per your wishes specified in the Will.
If you don't have a Will, your Probate Process will take much longer than usual.
Read this article to know more about What is Probate?
Why avoid Probate?
Following are the reasons why you should avoid Probate:
- Probate delays the distribution of your assets.
- It is time-consuming and expensive.
- The hiring cost of Probate attorneys is high.
- Unnecessary stress to executors, beneficiaries, and your loved ones.
- Details of your estate become public records.
What assets can avoid probate?
The following assets can avoid probate and the beneficiary gets the distribution after a person’s death without any involvement of the court to determine whether the beneficiary should receive them or not.
1. Jointly owned Assets.
Any property owned jointly with another person does not go through probate. For example, bank accounts and real estate, but can also involve any other asset with a joint owner.
2. Beneficiary accounts.
There are certain assets that are transferred directly to your beneficiary after you die. These are:
- Insurance policies
- And other retirement accounts.
Beneficiary designations override what is written in your will. So it is important to keep them updated.
3. Transfer-On-Death (TOD) assets.
You can use a transfer-on-death form to name beneficiaries for vehicles, securities, and real estate to bypass probate. Cars, small boats, stocks, bonds, brokerage accounts, land, and houses all qualify as TOD assets.
A TOD designation helps in a direct transfer of your assets and property to your named beneficiaries.
4. Payable-On-Death bank accounts.
It is an agreement between you and the bank or credit union accounts that can avoid probate by automatically transferring your assets to the designated beneficiaries.
5. Living Trusts.
If you create a Living Trust, your estate will be transferred to your beneficiaries soon after your death without any involvement of the Court.
Your Successor Trustee will make the distribution as per your wishes by transferring the ownership of the Trust property to your beneficiaries.
Once you put your assets into a Trust, those assets are named and owned by the Trust itself and after you die, those assets do not become a part of your Estate and therefore do not go through the Probate Process.