Helping Your Loved Ones Stay Safe and Secure When You Live Far Away 124871951

6 Steps to Avoid Probate

If you’re looking ahead to the future and considering how to care for your loved ones after you’re gone, then you’ve probably wondered how to avoid probate.

While creating a will is a good first step, it’s only that — a first step. It will not allow your family to avoid probate. Fortunately, there are a number of other actions you can take to plan for the future.

See: What Is Probate?

 

Create a revocable living trust

One of the most common and well-known ways to avoid probate is to create a living trust.

A living trust is a trust you create and place your assets into while you’re alive. You can revoke or change the trust at any time, and you continue to maintain control over your assets even though the living trust technically holds title. Upon your death, the assets remain within the trust and the successor trustee (person in charge of the trust) simply steps in.  Since the trust owns title to the assets, assets in the trust don’t have to go through probate.

Just as you would in a will, you can create rules in a trust about what happens to particular assets upon your death. You can also create a pour-over will mandating that any assets existing outside the trust get transferred into the trust immediately upon your death.

 

Use transfer-on-death accounts (TOD)

A transfer-on-death account is a pretty simple and straightforward method for avoiding probate. You can create transfer-on-death accounts at your local bank. These accounts include clauses that specify that the contents of the account transfer to a particular person at the time of your death.

You’ll likely be asked to sign and notarize a document making the account’s status official. If the recipient provides the bank with a valid certificate of death, then the bank will release the funds.

Of course you’ll want to let anyone who is listed as an account recipient know so that they can collect the money when it becomes available.

 

Own property jointly

Property law allows property to be held in a variety of different ways. One of these is “jointly.” That means that two people each own 50% of the property. When there’s a “right of survivorship,” if one of those people dies, the remainder of the property automatically transfers to the joint owner.

A property’s status as jointly owned should be included in the property deed and recorded with the town clerk.

 

Provide funds before death as a gift

As an individual, you can give up to $15,000 per calendar year (as of 2018) tax free. If you’re part of a married couple, you can give up to $30,000. You’re removing those assets from your estate, thereby avoiding probate on them, as well as removing them from your taxable income for the year.

 

Pay a loved one’s medical bills

If you pay for someone else’s medical bills — directly to the medical institution — you can pay an unlimited amount without owing any gift taxes on it. And you’ll keep that money out of your estate for the purposes of probate. Plus, you’ve helped someone who really needed it.

 

Use a Lady Bird Deed

Also called an enhanced life estate deed, a lady bird deed allows you to avoid probate by designating an automatic beneficiary for your property as you can with a life estate deed. But with a lady bird deed, you maintain greater control over the property during your lifetime, could be eligible to continue receiving benefits like Medicaid, and are not liable to the beneficiary if you decrease the value of the property or sell it.

 

Taking action early doesn’t just protect your assets. It protects your loved ones from the stress and expense of the probate process. If you need more information about what steps to take, don’t hesitate to contact us.