Because probate can be an expensive and time-consuming process, one of the goals of estate planning may be finding ways to keep one’s estate out of the probate process. Probate, as our New Jersey readers may know, is a court supervised legal proceeding in which a will is validated and its terms carried out.
The specific process of probate varies from state to state, but generally involves identifying and making an inventory of the estate’s property, identifying heirs, paying off debts and taxes, and transferring title to beneficiaries.
There are various ways to avoid probate. In fact various assets don’t even pass through probate. These include any policy or account with a beneficiary designation, such as life insurance, bank accounts, savings bonds, and payable-on-death and transfer-on-death bank accounts. Because of this it is important to make sure beneficiary designations are up to date.
Property held jointly, including property with a “right of survivorship” attached, also bypasses probate, because it automatically goes to surviving owner. That said, some paperwork is necessary to show that title to the property is held solely the surviving owner.
Trusts also stay out of probate, and for this reason, many people choose to construct trust-based estate plans. Living trusts are revocable by the creator or settler of the trust, and are often used in estate planning because they allow assets to be passed to heirs without having to involve a probate court. This typically allows for financial savings, as well as time savings. In addition, trusts are not available to the public, so allow for greater privacy. Trusts are also very flexible in terms of how they can be used in estate planning. In our next, post, we’ll take a closer look at some of the possibilities with trusts.
Source: Gazettes, “ESTATE PLANNING: Ways To Avoid Probate,” Curtis Kaiser, October 8, 2012