After you pass away, the assets you leave behind will go through a legal process called probate, unless you take steps to avoid it. Probate involves validating your will (if you have one), paying off debts and distributing your assets to heirs. Probate can take time and cause emotional and financial stress for your loved ones.
With this in mind, you can help lighten the load for your loved ones by planning ahead. The following strategies can help to ensure that few, if any, of your assets are ultimately subjected to probate.
Establish a revocable living trust
Establishing a revocable living trust is one effective strategy to avoid probate. With a revocable living trust, you can hand over ownership of your assets to the trust while you are still alive. Since the trust technically owns the assets, they do not need to go through probate upon your death. Instead, the successor trustee you’ve appointed can distribute the assets according to your wishes outlined in the trust document, bypassing the probate process altogether.
Consider joint ownership
Assets held jointly with rights of survivorship or tenancy by the entirety typically pass directly to the surviving co-owner(s) upon your death, bypassing probate. This can include real estate, bank accounts and investment accounts. However, it’s important to be aware of potential drawbacks, such as exposing assets to the creditors of the joint owner or unintended consequences if the co-owner predeceases you.
Payable-on-death accounts
Payable-on-death (POD) accounts are another useful tool to avoid probate. These accounts, such as bank accounts and retirement accounts, allow you to designate heirs who will receive the assets upon your death. By designating beneficiaries, the assets in these accounts transfer directly to them without going through probate. This can help streamline the process and ensure your loved ones can access the funds without delay.
With proper planning and legal and professional guidance, you can significantly reduce or even avoid the probate process, thereby easing the burden on your loved ones after your passing.