Probate can be a lengthy and costly process. It often involves court supervision, which can lead to delays and additional expenses. Fortunately, there are ways to transfer assets that bypass probate, saving time and money. Here are four methods to consider.
1. Real estate deeds
Real estate is often a significant asset in an estate. The title of a property can determine whether it goes through probate. Joint tenancy with the right of survivorship is one option. Here, both parties’ own equal shares. When one owner dies, the other automatically inherits the entire property.
Another option is tenancy by the entirety, exclusive to married couples. Each spouse owns the entire property. If one spouse dies, the other retains full ownership without probate.
2. Accounts with named beneficiaries
Many financial accounts allow you to designate a beneficiary. Upon your death, the funds transfer directly to the named individual, avoiding probate. Payable on Death (POD) accounts are common examples. These include bank accounts and retirement accounts. Simply naming a beneficiary ensures a smooth transition of assets.
Life insurance policies also work this way. The policy pays directly to the designated beneficiary, keeping the proceeds out of probate. Ensure your beneficiaries are up to date to avoid complications.
3. Lifetime gifting
Gifting assets during your lifetime can effectively reduce your estate’s size and avoid probate. You can transfer property, such as real estate, by adding an heir as a joint tenant with the right of survivorship. Additionally, you can gift cash or other assets up to the annual gift tax exclusion amount. This strategy requires careful planning to avoid unintended tax consequences, so consulting a legal advisor is wise.
4. Trusts
Trusts provide a versatile way to manage and transfer assets outside of probate. A revocable living trust allows you to manage assets during your lifetime. You can alter the trust as needed. Upon your death, assets in the trust transfer directly to beneficiaries, bypassing probate.
These strategies can help streamline the asset transfer process. Consulting with an estate planning attorney is advisable to tailor these options to your specific needs and state laws.