ESTATE PLANNING - WILLS, TRUSTS, PROBATE
Probate
Simply stated, Probate is the court process following a person's death that may include some or all of the following: Proving the authenticity of the deceased person's will; appointing someone to handle the deceased person's affairs; identifying and inventorying the deceased person's property; paying debts and taxes; identifying heirs, and distributing the deceased person's property according to the will or, if there is no will, according to state law. Whether or not probate is required depends on the total value of the Probate Estate. Probate allows for sorting out document ambiguities and resolving conflict; however, it can also be much more expensive, take more time, and be less private. There are several legal options designed to avoid probate for those wishing to do so. These methods are collectively known as Probate Avoiders.
Probate Avoiders
A Probate Avoider is an arrangement made during one’s lifetime that will remove assets from a future Probate Estate. Examples of a Probate Avoiders include Beneficiary Naming, Joint Tenancy, Pay-on-Death Accounts, and Living Trusts. A Will is NOT a Probate Avoider.
Beneficiary Naming
Some assets allow for naming a beneficiary to whom the asset will go upon the death of a deceased owner. This is commonly true with life insurance, IRAs, retirement accounts and annuities. It is important to keep the naming up to date.
Pay-on-Death Accounts
The owner of a bank account can name one or more individuals to receive their funds upon their death. Some brokerage accounts, mutual funds and stock transfers provide similar arrangements. It is also possible to complete a DMV affidavit that will automatically transfer ownership of a car or other registered asset upon your death.
Joint Tenancy
By adding another person(s) as joint owners on an asset, that person(s) receives a right of survivorship. There are risks involved with this, such as a falling out between the living owner and a joint tenant.
Living Trusts
A Living Trust can be set up during your life. It is an excellent way to avoid the cost and hassle of probate because the property you transfer into the trust during your life passes directly to the trust beneficiaries after you die. The successor trustee – the person you appoint to handle the trust after your death – simply transfers ownership to the beneficiaries you named in the trust.
Wills
A Will is a naming document in which you specify what is to be done with your assets when you die. It should also name your executor, or personal representative to carry out the functions of the will. Additionally, you can use your will to name a guardian for your minor children. It should be understood that a Will only affects the assets in the Probate Estate, and, unlike a Living Trust, it does not substitute for probate. Wills must be created and executed according to state probate laws in order to be valid.