If you discover it’s worthwhile to bypass probate, you can arrange your assets to keep them out of that process. Image: Sergii Gnatiuk/Shutterstock.com
If you draw up a will, any property included in that will must go through probate before it can pass to your heirs. The same thing happens if you die without a will: your estate still will have to go through probate, the process in which a court determines who inherits a decedent’s property.
In some states, this isn’t much of a problem. In other states, though, probate can be expensive and time-consuming. Check with a local attorney to determine the situation in your state.
If you discover it’s worthwhile to bypass probate, you can arrange your assets to keep them out of that process.
Accounts with beneficiaries don’t go through probate. IRAs, life insurance policies, and so on go directly to beneficiaries you’ve named. Jointly-held property also goes straight to the surviving co-owner, if the property is held “with right of survivorship.”
Property held in trust avoids probate, too. When you create the trust, you can spell out how the trust’s property will pass at your death.
The process of drawing up a trust:
First, the grantor must determine the purpose of the trust and identify the assets to be included.
Next, it’s crucial to decide on a trusted individual or entity to act as the trustee, responsible for managing the trust according to the specified terms.
The grantor should then designate the beneficiaries who will receive the trust’s assets, either during a specific event or upon the grantor’s passing.
Once these decisions are made, drafting the trust document, often with the assistance of an attorney specializing in estate planning, is essential to outline the terms precisely.
After the trust document is finalized, the assets must be transferred into the trust to activate it legally.
Regular reviews and updates to the trust may be necessary to adapt to any changes in circumstances or laws.
There are also ways to form a trust that specify the conditions under which a beneficiary is eligible to benefit from it, for those that think a “carrot and stick” feature is necessary or helpful.
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