If you are interested in avoiding probate and protecting your loved ones, consider the following:
Do: Create a Revocable Living Trust to Save Your Heirs from Probate
Don’t: Create a Revocable Living Trust and Then Forget About It
A revocable living trust has long been used in estate planning. When done appropriately, a living trust can protect your heirs from creditors and probate while providing them with whatever funds you want them to have.
A revocable living trust, on the other hand, may not satisfy your objectives if it is not properly structured and is not evaluated regularly. After your trust is signed, life continues. This includes births, weddings, divorces, funerals, natural disasters, changes to your retirement plan or career, assets bought and sold, and so on. These types of changes frequently necessitate the updating of your living trust (which is key in avoiding probate).
Do: Consult an experienced estate planning attorney who can advise you on your unique life circumstances and wishes
Don’t: Get sucked into do-it-yourself estate planning, which ultimately may leave your loved ones to clean up the mess your estate plan should ideally be designed to protect them from
Hiring a knowledgeable estate planning attorney is by far the most effective way to guarantee that your paperwork is appropriate for you and legally effective, while also avoiding probate.
There are numerous DIY software products and websites that provide living trust forms. These may be less expensive than hiring an attorney, but less expensive isn’t necessarily the best alternative. This is especially true for those who have complicated estates. (We have cleaned up lots of messes from DIY planning and at much more expense to the estate!)
Preprinted forms, even from a so called “legal” provider, are often overly simplistic and may not reflect a person’s circumstances. As a result, it might not accomplish one’s goals. For example, if one of your children or grandchildren is under 18 or is not excellent with money, a fill in the blank form may not include provisions for a trust to protect that child.
If you assume the paperwork you’ve spent the time to prepare will safeguard you and your family only to learn that there’s a problem when they’re most required, that may be a real, real tragedy; even worse, if you’ve already passed away by that time.
Do: Utilize joint tenancy as a tool to maintain continuity, avoiding probate when appropriate
Don’t: Count on a joint tenancy to pass to others if you are not comfortable giving up total control of the property (instructions and conditions cannot be added to a joint tenancy)
Each person owns an equal portion of the property under the joint tenancy with the right of survivorship. When one owner dies, their part is instantly transferred to the other owner(s) in equal shares, without the need for probate. We’ve all heard that joint tenancy is a quick and easy for avoiding probate, and this is occasionally true.
What if your spouse or children require help managing the property you have left them? Joint tenancy is ineffective. What if you wish to give instructions for how, when, and why your property should be used for your loved ones? Joint tenancy does not allow for any form of instructions.
Do: Utilize beneficiary designations to transfer assets immediately upon your death
Don’t: Assume a default on these accounts will pay to those closest to you. You must specifically designate the person you want to receive the asset.
Beneficiary designations allow you to transfer assets directly to individuals outside the probate process, even if you have a will. Life insurance policies, retirement accounts, bank accounts, and securities accounts are some examples of accounts that can include a beneficiary. With a designated beneficiary, this property will pass to them automatically at the time of your death.
Like your estate plan, these accounts should also be updated when a significant life event changes who your beneficiary should be. For example, suppose you have your ex as the designated beneficiary on file with your insurance company or retirement plan. In that case, your ex-spouse may collect the benefit and the only recourse your estate has is to sue to recover it. The better approach is to fix this by updating the beneficiary designation.
Do: Establish a trust for minor children with limitations and contingencies as you see fit
Don’t: Name your minor children as beneficiaries of financial accounts
If you have minor children, your will or trust should contain contingent trust provisions that would establish a trust for the minor children upon your death. If your minor children are named as the direct beneficiaries, the asset will not be a probate asset and hence will not be eligible to fund the trust. Instead, it will transfer to the children, but because they are minors, it will require going to court, having a custodian appointed to manage the funds, and the child will be entitled to the whole amount at the age of majority, which is generally much younger than most parents would want.
Our Estate Planning Attorneys Can Help
A well-crafted estate plan will help you pass on assets to your loved ones while saving them the headache of going through probate. Contact us if you’re ready to start an estate plan. We’d love to hear from you.
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