"Probate" is the judicial process that oversees the distribution of your estate after your death. This includes paying off your debts and distributing your remaining assets.
How Can I Avoid Probate?
There are many ways to deal with distributing your assets that do not have to go through the probate process. These include:
Joint Tenancy, in which you legally co-own assets such as a home, car, or bank account with another person. In a joint tenancy, when you pass away, the co-owner automatically receives full ownership of the asset, without having to go through probate to pass the title.
Life Insurance Policies, in which you pay a premium each year, and name a beneficiary to receive the payout when you die. The beneficiary automatically receives the benefit after your death.
Trusts, in which you transfer the legal title to an asset to a "trustee" (who can be yourself or another individual). When you die, the trustee is bound to distribute your property according to the terms of the trust.
What Are Some Advantages of Avoiding Probate?
Cost - Probate costs, including attorney's fees, can be costly. This is especially true if you own real estate in a different state, because probate proceedings would be required in both states. A trust can help to correct this problem.
Efficiency - The probate process can be complicated and time consuming, so it may take several years to completely resolve everything. Avoiding probate can speed up the process of settling your estate.
Privacy - Wills and probate proceedings are matters of public record. If you would like to keep your affairs private, and prefer that people don't know how your estate was distributed, avoiding probate through a trust or other mechanism is the only way to do so.
Flexibility - Trusts can be tailored to your specific requests. Furthermore, because execution of a trust is much less formal than a will, it is easy to change the terms of a trust.
Are There Disadvantages to Avoiding Probate?
Although avoiding the probate process may be attractive to some people, there are several disadvantages that should be considered:
Initial Cost - It usually costs slightly more to create and fund a trust than a will, but it may save money in the long run by avoiding paying probate costs out of the estate.
Uncertainty - In order to avoid probate completely, you must be careful to place all new assets you receive into the trust, otherwise, probate may still be required to distribute those assets.
Tax Consequenses - Taxes can be slightly higher for the first few years after your death than if a traditional will were used.
Do I Need A Lawyer?
With any estate planning matter, it is recommended that you consult an attorney. An experienced estate planning attorney can help familiarize you with your options, and advise you of the best possible estate plan for you. Estate planning can be very complicated, and it is best to consult an attorney now, to minimize problems for your loved ones after your death.
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