While some jurisdictions have revised probate laws to help settle smaller estates faster, others are not so accommodating. Probate today may not be as onerous as in the past. However, there are some drawbacks, according to a recent article, “Bypassing Probate,” from Cape Gazette. Among them are the probate costs, which vary by the estate size. For substantial estates, the cost may be as much as 5% of the estate’s total value.
If you’d like to avoid having your estate go through probate, an experienced estate planning attorney can help. Here are several strategies to discuss during your consultation:
Transferring assets to a revocable living trust. Consider the trust a separate legal entity created to own your assets. A revocable living trust, also known as an inter vivos trust, allows the creator (the grantor) to have full control as the trustee during their lifetime. They can add or subtract assets, change the beneficiaries at will and even terminate the trust.
When the grantor dies, the successor trustee follows the directions in the trust to distribute assets to trust beneficiaries. Revocable trusts don’t protect assets from creditors, estate creditors, or estate taxes. You may choose to use an irrevocable trust, which offers more protection but requires the grantor to yield control of the trust.
For some assets, ownership through joint tenancy with rights of survivorship (JTWRS) makes sense. This is typically done with real estate property. If the family home is not already owned this way, you must amend the real estate deed and title. Other assets like cars, boats, stocks and bonds, mutual funds and bank accounts can be titled JTWRS.
Be mindful of how any JTWRS changes may impact the share of assets you leave to heirs. For example, if you intend to distribute your assets equally among several children and the family home ownership is changed to JTWRS with one child, your estate distribution may become lopsided.
Check on your beneficiary designations. Accounts allowing for beneficiary designations include life insurance, IRAs, 401(k)s and brokerage accounts. Ensuring beneficiaries are correct is a common estate planning mistake and can have big repercussions. If you opened the accounts twenty years ago and have had major life changes, the beneficiary may be someone who isn’t part of your life anymore. Your will does not control these assets, so whatever your will says won’t matter.
Make gifts while you are living. These must be carefully planned to manage any tax liabilities; your estate planning attorney can help with this. Gifts to your spouse or qualified charities can be made tax-free, as can tuition payments made directly to an educational institution and medical expenses made directly to a healthcare provider.
Consult with an estate planning attorney to find which asset protection and distribution tools best suit your estate. You may be surprised to learn how much a well-designed estate plan can accomplish so much to protect you and your family.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Cape Gazette (April 21, 2024) “Bypassing Probate”