As you explore estate planning and build out your portfolio, you may have stumbled across the idea of probate. Or maybe you’ve been through the probate process with a family member and want to steer clear of it. Making an effective plan for your family’s future not only will alleviate stress, but shows great care and concern for loved ones.
Let’s delve into the details of probate and discover ways your family could avoid it with proper knowledge and a plan.
What is Probate?
Probate is a legal process that validates a will, appoints an executor and determines certain asset distribution. It is a judicial process that can take place with or without a will and may take months or even years to fully complete the process. Understanding the vehicles and methods to steer clear of probate court can ensure a swift transfer of assets from you to your beneficiaries in the event of your death.
Tips to Avoid Probate
Name a Beneficiary
One of the simplest tips to evade probate court is to ensure to name beneficiaries. In certain investment vehicles like life insurance, 401(k) and pensions, leaving beneficiaries blank can trigger the probate path.
Next, try to name a spouse or adult as your beneficiary. Minors are not legally able to receive benefits. Then, consider adding backup beneficiaries to ensure easy transfer for all possible scenarios.
Create a Trust
Creating a living trust is another way to avoid probate. A trust is a legal arrangement to ensure a person’s assets go to certain beneficiaries. It is managed by a trustee who is obligated to distribute assets according to the agreement, bypassing probate.
If an individual holds a will instead, their assets still may be subject to the probate process. An executor of the will would need to initiate that public process and work
with the court to fully complete the distribution of assets. Keep this in mind when deciding between a will or a trust.
Own Property Jointly
Owning real estate or property jointly can ease the transition of ownership. Having a partner or spouse on the deed eliminates the need for probate for a successful asset transfer. Consider this as you plan through your estate or as you make property purchasing decisions in your retirement years.
Consider Probate-Bypassing Investments
Certain investment vehicles are not included in the public probate process as long as beneficiaries are in place. Retirement and investment accounts like 401(k) plans, IRA’s and medical savings accounts do not need go through probate.
Another way to avoid probate is by using life insurance policies or annuities as an investment vehicle. These can pass directly to a beneficiary in a lump sum when you pass away, alleviating the need for the public probate process altogether. As you continue on your estate planning journey, consider these elements as you choose investment vehicles, beneficiaries and end-of-life wishes.
Bankers Life is Here
Planning ahead can begin today. Bankers Life is here to walk with you as you look ahead to the future. From life insurance to investment options, we are here to support your financial journey. Contact a representative today to learn more.
Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.
