If you worry about probate, you are not alone. The system can be complex and expensive, and the process to settle an estate can be lengthy – something you may not want your children to have to deal with probate after you pass away.
Probate can use up valuable resources that would have otherwise been left to your children and other heirs, and can also take up a great deal of time that could be better spent on other pursuits.
You may be unsure whether there are steps you can take now to avoid probate later. While it may not always be possible to avoid probate altogether, there are things you can do to help streamline the process.
Putting your money into a trust is one estate planning techniques you can use to reduce your heirs’ need for the probate process. Placing money and other assets in trust takes them out of your estate. You can choose to create a trust during your lifetime, or a testamentary trust. Either way, upon transfer into the trust, the assets become the property of the beneficiaries. All that needs to be done is for your heirs to prove their identities and that you have passed away, as opposed to working their way through the probate process.
Transfer on Death (TOD) deeds
A TOD deed can be set up for deeds to real property and vehicle titles. When you pass away, deed to the property automatically transfers to the person named, no probate is needed. This can save a lot of time, money and aggravation.
Payment on Death (POD)
POD works for bank accounts and some other financial arrangements. If a person is POD on your checking account, for example, they automatically have access to that checking account with proof that you have passed away. This means they do not have to go through a lengthy process to access the funds you left to them. This is especially helpful when the money is to be used to pay your funeral costs and other final expenses, eliminating the need to have your children or other heirs pay out-of-pocket and wait to get reimbursed.
Another way to reduce the need for probate is to give away your assets while you’re still living. The less you have when you pass away, the less complicated things will be for your heirs. There are IRS limits for yearly gifts, so you want to make sure you’re staying within those limits to avoid paying extra taxes. As long as you follow financial rules it can be very helpful to allocate your assets before death, making it easier on your heirs at a later date.