What is probate?

You’ve likely heard the word “probate” before but may not be completely familiar with the word or the process. Let’s highlight a few things that may be helpful. In simple terms, probate is the legal process that happens after someone passes away. It's when the deceased person's assets are distributed to their heirs and beneficiaries according to their will or the laws of the state.

Now, you might be wondering why you should care about probate. Well, there are a few reasons. First, probate can be a long and expensive process. It can take months or even years to complete, and it can eat up a significant portion of the estate's value in legal fees and other costs. Second, probate is a public process, which means that anyone can access the court records and find out what assets you had, who your beneficiaries are, and other personal information.

So, if you want to avoid probate, what can you do? While we aren’t legal experts and this is not legal advice, we have researched a few common ways people prepare their estate plan to avoid probate. Here they are:

Beneficiary Designations

You can also avoid probate by naming beneficiaries for certain assets. This is commonly used for retirement accounts, life insurance policies, and other assets that have a designated beneficiary.

For example, let's say that you have a 401(k) plan through your employer. You can name your spouse as the primary beneficiary and your children as the contingent beneficiaries. When you pass away, the funds in your 401(k) plan will pass to your beneficiaries without going through probate.

Create a Living Trust

One of the most popular ways to avoid probate is to create a living trust. A living trust is a legal document that allows you to transfer ownership of your assets to the trust while you're still alive. You can then name yourself as the trustee, which means that you'll still have control over your assets. When you pass away, the assets in the trust will pass to your beneficiaries without going through probate.

For example, let's say that you own a home, a car, and some investments. You can create a living trust and transfer ownership of those assets to the trust. You'll still be able to live in your home, drive your car, and manage your investments as usual. But when you pass away, those assets will pass to your beneficiaries without going through probate.

Joint Ownership

Another way to avoid probate is to own assets jointly with someone else. When you pass away, the assets will pass to the joint owner without going through probate. This is commonly used for real estate, bank accounts, and other assets that can be owned jointly.

For example, let's say that you own a house with your spouse. When you pass away, your spouse will automatically become the sole owner of the house without going through probate.

Gifts

Finally, you can avoid probate by giving away your assets as gifts while you're still alive. This can be a great way to reduce the size of your estate and avoid probate altogether. However, there are some tax implications to consider when giving away large gifts, so be sure to talk to a tax professional before making any major gifts.

Other Considerations

It's also important to keep in mind that estate planning is not a one-time event. Your circumstances and wishes may change over time, so it's a good idea to review and update your estate plan periodically. This is especially important if you experience major life events, such as the birth of a child, a divorce, or the purchase of a new asset.

In addition to the strategies mentioned above, there are other steps you can take to make the probate process easier for your loved ones. For example, you can create a detailed inventory of your assets and debts, so your executor knows exactly what needs to be distributed and paid off. You can also create a letter of instruction that outlines your wishes for your funeral, your digital assets, and other important matters.

Probate can be a long and expensive process. By making a few adjustments now, your family can avoid probate and ensure that your assets are distributed according to your wishes. If you're unsure about what strategy is best for you, be sure to talk to an estate planning attorney who can help you navigate the legal and financial implications of each option.

Ultimately, the goal of estate planning is to ensure that your assets are distributed according to your wishes and that your loved ones are taken care of after you're gone. By taking the time to plan ahead and avoid probate, you can make this process smoother and less stressful for everyone involved.

‍