With the new year fast approaching, it is a good time to make sure that your estate plan is up to date and in order. A well-structured estate plan ensures the smooth transfer of assets to heirs without the probate process. Probate is the legal process that verifies the validity of the deceased individual's last will and testament. Probate tries to ensure that the intentions of the deceased have been carried out as they would have wished. This process is time consuming and can be quite costly. It can take six months or longer to complete, and the property cannot be transferred to the heirs until probate is completed. In addition, this reduces the amount of money the heirs will ultimately receive and increases the time that it will take for them to actually receive it.
Fortunately, there are inexpensive and effective ways to avoid probate with proper estate planning.
- Designating beneficiaries for certain accounts can ensure immediate transfer upon the account holder's death. This can be done for life insurance, bank, investment and retirement accounts.
- Proper titling of jointly owned assets to ensure that all property owned jointly will pass immediately to the surviving partner immediately upon the decedent's death, even if there is no last will or testament. Generally, the ownership structure that can be used to ensure this is Joint Tenancy with Rights of Survivorship or Tenancy by the Entirety. Tenancy in Common may not result in immediate transfer to the co-owner, but may result in a much more complicated transfer of the decedent's ownership share to other heirs.
- Establishing a living trust avoids probate by transferring the ownership of assets into the trust. This process should be done by a qualified estate attorney, and while it will cost some money to get the trust established, these costs can be dwarfed by those associated with probate when settling the estate
- It may be wise to consider gifting some property while the owner is alive to allow the transfer to the heirs immediately. Also, donating some of the estate to a charity may allow for a charitable deduction while the owner is alive.
- A life estate can be established so that the owner of the life estate (the life tenant) has the exclusive right to occupy and use the property during his or her lifetime. The life estate deed allows the life tenant to assign a "remainder interest" to one or more individuals. Full ownership then passes immediately to them upon the life tenant's death.
It is important to seek the advice of a trusted financial advisor to make sure that your estate plan is established and in order. They can then recommend a qualified estate attorney to draft the required legal documents to help you to avoid probate.
It is a good time to look ahead to the new year and to get your financial house in order. Please contact me if I can assist you with your financial planning needs in 2019.