Thinking about your own death is never a pleasant experience. However, it's an important part of financial planning, especially if you have loved ones who depend on you for financial support. At some point, you will pass away, and at that time, you'll need a plan to guide how your assets are distributed to your spouse, children, and other loved ones.
One thing to consider is probate, which is the legal process of settling one's estate. Your estate will go through probate after you pass away. During that time, your executor will work with the local probate court to sell assets, pay debts, file taxes, and ultimately distribute assets to your heirs. Probate can be a lengthy and costly process. Your estate could pay attorneys, accountants, real estate agents, and more, depending on the complexity of your assets.
Fortunately, there are a few ways you can minimize the assets that go through probate and get your assets to your heirs as fast as possible. Below are a few ways to do so:
Give assets away before you die
If you have assets that you know you will give to specific individuals, and you don't need those assets while you're alive, consider transferring them to your heirs before you pass away. That way, the asset is out of your estate and won't be tied up during probate after your death. As an added benefit, you get to see how your loved one uses the asset and how it helps their life while you're still alive.
Some states have lookback periods and consider gifts right before death as part of the probate estate, so you'll want to start gifting assets as soon as you can.
Use beneficiary-designated assets
Assets that have beneficiary designations bypass probate. Instead of going through probate, they are paid directly to the beneficiary listed on the asset. This includes things like 401(k) plans, IRAs, annuities, life insurance, and more. You can put money into these assets to get cash to your heirs faster after you pass away. Assets with payable-on-death designations, like bank accounts, also bypass probate.
Set up a trust
One of the most effective ways to avoid probate is to use a trust for estate planning purposes. You designate a trustee to manage the trust and then make the trustee the owner of certain assets. When you pass away, the assets are paid to the trust beneficiaries according to the terms of the trust. They avoid probate altogether and are paid to your heirs in whatever manner you wish.
A probate attorney can help you prepare for probate and implement strategies to get your assets to heirs as quickly as possible. Contact a probate attorney in your area today.
