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What Steps Should I Take to Avoid Probate?

Probate is a legal process that occurs after a person's death to settle their estate, pay debts, and distribute assets to their heirs or beneficiaries. Avoiding probate can save time, money, and keep personal affairs private. In this article, we'll discuss the steps to avoid probate and why you might want to consider it.

Heritage Law Office provides experienced and knowledgeable estate planning services, helping clients avoid probate and protect their assets. Contact us either online or at 414-253-8500 to schedule a free consultation today.

Creating a Revocable Living Trust

A revocable living trust is a legal document that allows you to transfer your assets into a trust while maintaining control of those assets during your lifetime. Upon your death, the assets are transferred to the designated beneficiaries without the need for probate.

How a Revocable Living Trust Works

  1. Create the trust document: Work with an experienced estate planning attorney to draft a trust document that outlines your wishes and designates a successor trustee to manage the trust upon your death.
  2. Transfer assets to the trust: Place your assets, including real estate, bank accounts, and investment accounts, into the trust.
  3. Manage the trust during your lifetime: As the grantor and trustee, you maintain control over the trust assets and can make changes or revoke the trust at any time.

Joint Ownership of Property

Owning property jointly with rights of survivorship allows for the automatic transfer of ownership to the surviving owner without the need for probate.

Types of Joint Ownership

  1. Joint tenancy with rights of survivorship: Both owners have equal ownership rights, and when one owner dies, their share passes directly to the surviving owner.
  2. Tenancy by the entirety: A form of joint ownership only available to married couples, where both spouses have equal ownership rights, and the surviving spouse automatically inherits the property upon the other's death.

Beneficiary Designations

Naming beneficiaries on your financial accounts, life insurance policies, and retirement plans allows for the direct transfer of those assets to the designated beneficiaries upon your death, bypassing probate.

Updating Beneficiary Designations

  1. Review your accounts regularly: Ensure that your beneficiary designations are up to date and reflect your current wishes.
  2. Consider contingent beneficiaries: In case your primary beneficiary predeceases you or is unable to inherit the asset, a contingent beneficiary will inherit the asset instead.
  3. Coordinate with your overall estate plan: Make sure your beneficiary designations are consistent with your will, trust, and other estate planning documents.

Payable-on-Death and Transfer-on-Death Accounts

A payable-on-death (POD) account allows you to name a beneficiary for your bank accounts, and a transfer-on-death (TOD) account does the same for your investment accounts. Upon your death, the assets in these accounts are transferred directly to the named beneficiaries, avoiding probate.

Setting Up POD and TOD Accounts

  1. Contact your financial institution: Most banks and brokerage firms offer POD and TOD account options.
  2. Complete the required paperwork: Fill out the necessary forms to designate your beneficiaries and update them as needed.

Gifting Assets During Your Lifetime

Giving away assets during your lifetime can reduce the size of your estate and the need for probate. However, consider potential tax consequences and the impact on your financial security before making significant gifts.

Gifting Strategies

  1. Annual gift tax exclusion: In the United States, you can gift up to a certain amount per person per year without incurring gift tax.
  2. Gifts for education and medical expenses: Paying for someone's education or medical expenses directly to the institution or service provider does not count towards the annual gift tax exclusion and is not subject to gift tax
  3. Charitable gifts: Donations to qualified charities can provide tax benefits and reduce your taxable estate.

Small Estate Affidavits and Simplified Probate Procedures

Some states offer simplified probate procedures for small estates, allowing the transfer of assets without a full probate process. Check your state's laws to determine if you qualify for these options and what steps are necessary to take advantage of them.

Qualifying for Simplified Probate Procedures

  1. Determine your state's requirements: Each state has different criteria for qualifying as a small estate, usually based on the value of the estate.
  2. Complete the necessary paperwork: If your estate qualifies, you'll need to complete a small estate affidavit or another simplified probate procedure form.
  3. Obtain court approval: In some cases, you may need to obtain court approval before using a small estate affidavit or simplified probate procedure.

Consult an Estate Planning Attorney

Estate planning is a complex process, and the best way to ensure your assets are protected and your wishes are carried out is to work with an experienced attorney. At Heritage Law Office, our attorneys can help you create a comprehensive estate plan tailored to your specific needs, with strategies to avoid probate and protect your legacy.

To discuss your estate planning options with an experienced attorney, contact Heritage Law Office either online or by calling 414-253-8500 today. Our knowledgeable team is ready to assist you in creating a plan that ensures your assets are distributed according to your wishes, without the need for probate.

Frequently Asked Questions (FAQs)

1. What is a Revocable Living Trust and How Does it Help Avoid Probate?

A revocable living trust is a legal entity into which you can transfer your assets while still retaining control of them during your lifetime. The primary advantage of such a trust is that it allows your assets to be transferred directly to your designated beneficiaries upon your death, bypassing the probate process. The trust is "revocable", which means you can make changes or even dissolve it anytime during your lifetime.

2. How Does Joint Ownership of Property Help in Avoiding Probate?

Joint ownership with rights of survivorship is a way to own property with another person, and it allows the property to pass directly to the surviving owner upon your death, avoiding probate. There are two types: joint tenancy with rights of survivorship, where each owner has an equal share, and tenancy by the entirety, which is only available to married couples.

3. What are Beneficiary Designations and How Can They Be Used to Avoid Probate?

Beneficiary designations are an effective tool for avoiding probate. By naming beneficiaries on your financial accounts, life insurance policies, and retirement plans, these assets can be transferred directly to your named beneficiaries upon your death, thus avoiding probate. It is important to regularly review and update your beneficiary designations to ensure they align with your current wishes.

4. What are Payable-On-Death and Transfer-On-Death Accounts?

Payable-on-death (POD) and transfer-on-death (TOD) accounts are financial tools that let you name a beneficiary for your bank and investment accounts. Upon your death, the assets in these accounts are transferred directly to the beneficiary, bypassing probate. Contact your bank or brokerage firm to set up these types of accounts.

5. Can Gifting Assets During My Lifetime Help Avoid Probate?

Yes, gifting assets during your lifetime is a strategy that can help reduce the size of your estate and thereby minimize the need for probate. You can take advantage of the annual gift tax exclusion, which allows you to gift a certain amount per person per year without incurring a gift tax. Moreover, direct payments for someone's education or medical expenses, and donations to qualified charities are not subject to gift tax.

Contact Us Today

For a comprehensive plan that will meet your needs or the needs of a loved one, contact us today. Located in Downtown Milwaukee, we serve Milwaukee County, surrounding communities, and to clients across Wisconsin, Minnesota, Illinois, and California.