You may assume that assets are immediately transferred to your heirs after you die if you use a last will to state your final wishes. Many people are under this impression, because a last will can seem like a very simple, straightforward document. If you speak with a probate lawyer, you may come away with a different understanding.
Probate can be briefly defined as the legal process of estate administration. The heirs that are named in the last will may not be the only interested parties. There could be outstanding debts, so creditors must be notified about the decedent’s passing. Plus, the court examines the will to make sure that it is valid.
The property that would pass through the probate process is property that was in your sole, direct personal possession at the time of your passing. However, there are a couple of exceptions to this rule. A simplified probate process could be utilized if the estate is valued at $150,000 or less. The utilization of a Spousal Property Petition may also be possible when a surviving spouse is inheriting property from his or her spouse.
A probate lawyer can certainly provide much-needed guidance when probate enters the picture. However, all property transfers are not subject to the probate process. Let’s look at some types of asset transfers that would not go through probate.
Payable on Death Accounts
A payable on death account is a bank or brokerage account that has a beneficiary. These accounts are sometimes called transfer on death accounts or Totten trusts.
If you create this type of account, you do not have to worry about surrendering complete control while you are living, because the beneficiary would not be able to access the resources while you are alive. After you pass away, the beneficiary would assume ownership of the remainder in the account, and this transfer would not be subject to the probate process.
Property Held in Joint Tenancy
You can add another owner to property that is in your possession. If you add a co-owner, this person is referred to as a joint tenant. As soon as you add the joint tenant, this individual would own half of the property, and you would own half of the property.
Joint tenancy typically comes with something called right of survivorship. After the death of one joint tenant, ownership of the entirety of the property would be transferred to the surviving joint tenant. Probate would not be a factor.
This can sound like a turnkey arrangement, but remember, you are surrendering half ownership of the property while you are still alive, and this can potentially cause difficulties. The portion of the property that is owned by the joint tenant could be attached if he or she was to run into legal or financial problems. Plus, you could not sell the entirety of the property, because you would not own all of it.
Life Insurance Proceeds
You may have life insurance policies on your own life. After you die, assuming the contractual terms were met, the company would pay the beneficiaries in a direct fashion, and the probate court would not be involved.
Revocable Living Trusts
There are various different pitfalls that go along with the probate process that would come into play if you use a last will. It is time-consuming, and the heirs to the estate don’t receive their inheritances while the estate is being probated by the court. There is also a reduction in the amount that the inheritors will eventually receive, because there are probate expenses.
A probate attorney can assist during the process, but there are other options. Revocable living trusts are very popular among people who want to facilitate efficient asset transfers outside of probate. You create the trust, you convey assets into it, and you can act as the trustee while you are living.
You name a successor trustee in the trust agreement. After you die, the successor trustee would distribute assets to the beneficiaries in accordance with your wishes, and these distributions would take place free of the probate process.
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